There are a lot of mum and dad investors out there who are completely overwhelmed by investment choices and different companies offering different products. Often they don’t have the confidence to manage their own investments and are looking for someone they can trust to manage their life savings for them.

There is nothing wrong with that and if you don’t have the confidence to manage your own investments then you probably shouldn’t.

One option in this case is a term deposit or a safety deposit bond. These are very safe and generally come with a guarantee. Remember thought that anything which is safe and particularly guaranteed will be very low return.

This is where people can leave themselves open to catastrophic failure because although they like the safety of these products, the income is too low so they will risk their portfolio by investing in higher return products without understanding what it is they are investing in.

This doesn’t mean you are stuck with low performance investments. The key is to learn what questions to ask of the fund manager when assessing a particular fund. This way you can make an informed decision and properly assess the risks.

Never ever invest in anything purely on recommendation of a friend or family member unless that person is an experienced professional in that type of investment.

Remember you are dealing with your life savings! Think about how long it took to accumulate it and what impact it will have on your life if you lost it. Given that it has taken your whole life to accumulate it, why wouldn’t you invest a fraction of that time to educate yourself on how to protect it?

A few basic and simple questions to ask when assessing your investment products will help you make an informed and confident decision:

- What are the exit fee’s if I wish to get out of the investment?
- How long has the fund been operating and show me proof of its performance?
- Is it just shares or a combination of shares, property and other business interests?
- Is the property commercial, industrial or both?
- Is the property in Australia or some overseas?
- Is the share portfolio on the Australian market or overseas market or both?
- Are the shares protected with a put option?
- Are the shares blue chip or speculative – show me proof?
- Do you write call options on the shares?
- Is the property portfolio tailored for capital gain or income?
- If the property portfolio is tailored for income, what is the occupancy rate?
- If the portfolio underwritten, if so who is the underwriter?
- Are there any margin loans on the shares and what percentage is financed?
- What fees are involved?
- How does the fund manager get paid? Is it commission or percentage or both?
- What reports will I receive and the frequency?
- Will I get to make decisions on my portfolio?
- How do I contact someone and who do I contact to discuss my portfolio?

If you ask some of these simple questions the fund manager will quickly assume you are not a mum and dad uneducated investor and his body language will change. If he takes a defensive position he either can’t answer because he doesn’t know or he has something to hide.

If the fund manager doesn’t know about the investment portfolio, how safe do you think your money is?

In my experience a professional in the industry will recognise an educated investor and will open up and freely give information. Professionals want to deal with educated people because they make confident informed decisions.

It doesn’t take much to learn the basic principles of investing but it is the only way to guarantee peace of mind.

Bye for now

Tim