Expensive Mistakes

There are two ways of learning: You can be taught how to do something correctly, or you can be shown the consequences of doing it wrong. In the world of investment, it’s a lot cheaper to learn from others’ mistakes.

A recent edition of a television current affairs program detailed how elderly Australians, many of them with only modest nest eggs, had lost up to $15 billion in recent years through dubious investment schemes.

Most of these schemes involved the provision of high-risk finance to property ventures, some involving speculative residential projects. Yet, the program found, these investments were often promoted as safe, secure, and bank-like.

In some cases, the promoters of the schemes extracted high fees (as much as 5%) from the vehicles, and engineered related-party transactions that cost the elderly clients millions—without giving them any say in the matter.

Click here to read the full article by Jim Parker, Vice President, DFA Australia Limited