Thoughts on Finance, Current Affairs and General Consumer Ripoffs - Damn Lies and Statistics

There are many adverts that appear online for various investments offering what they claim to be guaranteed returns, sometimes in the order of 10-20% per year in things like airport parking spaces at airports such as Glasgow or Gatwick. In some cases the parking space may not even exist. The reality is that these investments are not regulated and can lose ALL your money so any claims about guarantees should be considered as unenforceable - if the company offering the guarantee goes bust then it will not be able to pay out any investors making the guarantee worthless. Some people may be targeting investors with a pot of money after the new pension freedoms who think that it's too risky to invest in the stock market and are attracted by the offer of guaranteed returns. What these investments in airport parking don't tell you is that the return is often only promised for a couple of years so after that you may receive no further money and your parking space may be worthl...

A similar example but this time assuming all dividends are invested again rather than taken as income.  Assume in 2011 you invested £10,000 in this investment trust. The price then was £6.60 per share so you'd have got 1515 shares you now own. In 2011 you'd have received 28.75p income per share as dividends, that's a total of £435.56 and equivalent to 4.3% on your £10,000 but rather than taking that income you reinvest it to buy more shares. At £6.60 each that's another 66 shares you can add to your holding bringing the total to  1581 . In 2012 the share price had dropped to 640p so your £10,000 would now have been worth £10118, an increase on your original investment as it now includes reinvested dividends. However if you'd held your nerve and not sold out you'd have received your annual dividends, this year of 29.75p per share now based on the 1581 shares, a total of £470.34 so now 4.7% of your original £10,000. Again you reinvest this and buy another  73 ...

I received the annual report for one of my investments recently and with some comments I've seen about investments being too risky or not understood thought it might help to give some numbers. These are for an investment trust - a company setup to invest in shares and the Investment Trust shares are themselves traded on the stock market so easy to see the value and buy/sell them. Some of these investment trusts have existed since 1868 so they have a very long term track record behind them. Assume in 2011 you invested £10,000 in this investment trust. The price then was £6.60 per share so you'd have got 1515 shares you now own. In 2011 you'd have received 28.75p income per share as dividends, that's a total of £435.56 and equivalent to 4.3% on your £10,000. In 2012 the share price had dropped to 640p so your £10,000 would now have been worth £9696 , a drop of £304 on your original investment. However if you'd held your nerve and not sold out you'd have...