The Difference Between Sound Investment Advice and Public Perception

by Kaylie Phelps

For anybody who likes to read and learn about investment, it’s no secret that there’s a big difference between public perceptions of investment strategy and the stuff that advisors would typically recommend. If you read this blog, you’ve hopefully learned some truly helpful strategies to maximize dividends, while minimizing risk. But there are a lot of people out there who don’t know the first thing about how to do this. That’s not to say that they’re not smart people. Most people could comprehend these things, but they’re not taught in school, at least not the kind of schools that most people go to. For the rest of us, we’ve got to spend some time learning the basics of sound investment. Otherwise, there’ll be big differences between the stuff we think we know and actual sound investment strategy. Here are some examples from a recent Lottosend poll.

This poll was performed in the UK, hence the slight difference in terms. But you’ll quickly see that the folks’ perceptions of investment are pretty closely related to the things that regular American people think.

Investment Type / Percentage
Property Investment / 33.40%
Tax free ISA allowance / 32.70%
Investing in Stocks and Shares / 11.60% Inves­tment
Trusts / 8.20%
Asset Inves­tments / 6.70%
Unit Trust or OEIC / 4.10%
Tracker Funds and ETFs / 3.40%

Some of these investment forms are European specific, but most aren’t or at least have American counterparts, so all of our readers should be able to glean some knowledge from this list. The first thing that stands out is the people think property investment is the best way to go.

I’m not going to say that it’s not a sound investment strategy, properly handled. But few investment advisors (if any) would recommend that someone become totally invested in property at the expense of all else. Most would say that this isn’t the best start with investment,and I would agree.

This is the case for several reasons. 1) There is a ceiling to how much value a house or business property can take on, not so with investment accounts and the like. 2) Properties require improvements and maintenance. 3) For most people, property represents a single deep investment, meaning that if anything goes wrong with the single investment, the individual is in a tough spot. Investment properties can, indeed, be excellent investments, but they should usually be invested in after other, more diverse, investment options are locked down.

The ones I typically recommend are located at the bottom of this poll. ETFs, properly chosen through services like Betterment, are one of the safest ways to have serious investment growth over years and decades. Unlike property, there’s no limit to how much an investment can increase, because time is unlimited. Sure, it’s not unlimited for a person, but if an investor starts young, he or she can have several decades to enjoy dividends and compound interest.

My takeaway from this poll is that the average person needs to learn a little more about investment. It’s hard to become meaningfully invested without laying the groundwork found through knowledge, and it really doesn’t take that long to learn it. But learn it we must if we’re going to make investment a good use of our time and energy.


Logbook Loans v Personal Loan: The Pros & Cons

by Mrs Money

Everyone has to borrow money from time to time. Figures published by The Money Charity show that the average household debt in the UK in June 2015 came to £53,961, including mortgage repayments.

Shop around

It really does pay to shop around for a loan. Interest rates differ and also repayment terms vary widely. If you need money in a hurry and have a poor credit score, then log book loans are a useful source of finance. You will be taking out a secured loan, as you will be offering ownership of your car, through its logbook, to the lender. Upon repayment of the loan, possession of your vehicle will revert back to you. Repayment can be made in monthly or weekly segments.

Interest rates

When calculating whether you can afford to borrow money you must always check the interest rates. Representative Annual Percentage Rate (APR) is the rate that will added to the coast of your loan, but remember that the APR figure that’s published only relates to 51% of borrowers, the remaining 49% of borrowers will have to pay a higher interest rate. You may also be charged a fixed annual interest rate too. For example you could borrow £1,000 over 36 months, and then adding on APR and fixed interest rates find that you’re repaying £2,880.

Some personal loans are more expensive

As well as looking at the advertised APR you should also check out any additional fees, redemption charges and late payment penalties. In some instances you can access a personal loan if you have a poor credit score, but the lender will check your credit rating and this search will be noted. If you’ve applied for a personal loan and been rejected, this activity will also be registered on your credit rating.

Banks and building societies and specialist loan companies are the main sources of personal loans. As an unsecured personal loan is seen as a high risk you can expect to pay high interest rates, and a wide range of fees. If you miss an arranged repayment date and your lender has to contact you as a result of this, expect the fees to escalate at a frightening rate.

Brokers charge too

Many personal loans can only be sourced through a broker. You will be charged brokerage fees on top of the cost of your loan if you use a broker to access credit for you. A recent article on the This is Money website highlighted the fact that the Financial Conduct Authority (FCA) has clamped down on how brokers advertise their services. The Authority has instructed all brokers to display their rates clearly. Brokers have also been instructed not confuse customers into believing that they are dealing with a lender. According to the FCA 80% of consumer credit complaints received by the authority related to brokers charging upfront fees.

Whether you are looking for a personal loan or a logbook loan, always try to deal directly with the lender and also make sure that you work out the repayment costs before you go ahead and borrow.

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