The keyword here is ‘high-risk’, in addition it appears that London Capital’s own investment funds are not covered by any guarantee scheme so investors are likely to lose everything. Very sad for those affected and a lesson for everyone.
At times like these, I feel quite lucky to have no money
The big lesson here is to diversify. Don’t put all your eggs in one basket. Don’t trust a single product, asset class, or bank.
And never believe the word “safe” without doing some research of your own to work out where the risks lie. Such research can be as simple as reading the prospectus properly or googling the product type but a few minutes of work can help avoid the traps. It’s interesting that the article does quote one financial advisor who looked into the scheme and worked out that there were a number of issues - clearly a chap who does his homework properly.
Also, check whether investments are covered by a compensation scheme.
I am shocked though that the FCA appears to have sat on things for three years before finally acting.
If it sounds too good, it more than likely is.
8% is not “too good to be true” - it isn’t hard to find structured investments returning 6-8% with reputable companies, I’ve had a few with full return of capital and interest paid as advertised.
The problem is that it is not all that easy as a non expert to do due diligence, and easy to be swayed by a flashy website which offers “cast iron” returns of 8% and puts “your capital is at risk” in much smaller text at the bottom where most people won’t even see it.
Add to that the fact that high street returns on ISAs are in the 2% region and it is easy to see how someone looking to invest a pension lump sum and wanting the best return because that is what you will have to live on could easily get sucked into something like this.
It is clear that the adverts were designed to play down the risk and that investors did not understand that lack of FSCS cover did, indeed, mean that if it went pear shaped they would lose everything.
Good advice - though if you are a small investor, relying on the returns as income loosing even a few 10’s of 1000’s of capital - even if not your whole pot - can put a significant dent in your plans.
Have you got a few 10,000’s of £ you could stand to lose completely?
I used a building society to invest some money. They would not allow me to invest as much as I wanted to, they made me fill a form in to assess my attitude to risk and took lots of information. They then told me how much I should invest, spread it over 3 sorts of investments and they were all medium to low risk.
I see, it is down to risk aversion.
We could probably do the same with our own investment managers.
Probably too late now for a short term capital return but UK property can provide a better income than say an ISA and certain blue chip shares offer attractive dividends.
Reminds me of an old joke. How to own a small Dot Com company, buy a big one and wait.
Being able to afford to loose it is one thing but being able to cope mentally with loosing it is another. It’s a fact that losses impact us emotionally more than gains. Every investment is a risk reward equation, a pain vs gain equation. The human mind is a funny thing.
Mmm… sounds like some dodgy accountancy… follow the money… down the rabbit hole…
Hmm, if you really want to know then frighten the Hell out of yourself and read the website ‘How Stuff Works - Money’
Basically there is no such thing as ‘money’ in a physical sense, and less than a few percent of what we see as notes and coins have any physical ‘value’ or represent anything like the financial transactions that take place over the web.
It is a dream world based entirely on trust, and as America remains the ‘preferred world currency’ most deals are done in that denomination. Guess who is the President of that country? I have a major problem using the term ‘trust’ with that gentleman (apologies to Mark Rimmer who I know is a fan)
I haven’t checked this out so stand to be corrected but in a recent book I was reading I read what could be called a Trivial Pursuit question which is;
Q 'What is the unique feature of American Dollar notes that no other currency has?
A. No matter what denomination they are they are all exactly the same physical size.
I love stuff like this!
My ol’ gran’s advice was best… never a borrower or lender be.