Wednesday, April 23, 2008

Plonka's Financial Tips

"Well now" says Dikkii, "What have we here?" That's as it should be though because normally, if I had a query concerning the scary world of finance, I'd ask Dikkii. It's a simple fact of life that if you want an informed answer, ask someone that knows a thing or two about the subject.

I call myself "Plonka", not because there was a mathematician of that name - I didn't know that when I chose the name - but because I "plonk" along. I tend to waffle on a great deal about things I know very little about with only the tenuous pretext of scant research, usually at Wiki, to back me and I wait for the blogophere to correct me. It's fun, I make friends and learn as I go.

There are however, some things I know with absolute certainty. One of those things, and herein lies the "tip", is that if a man says to you "I can get you a 70% return on investment", your best course of action is to thank him for his time and politely show him the door, the other side of it for preference. On this point, I'm sure Dikkii will agree with me so I feel confident in sharing this advice.

From The Age:

Mr Hoy's company, Chartwell Enterprises, reportedly promised investors returns of up to 70%. Instead, many were left watching in disbelief yesterday as the locks were changed on its offices in Geelong's Ryrie Street.

"In disbelief"... Surely they can't be serious. Someone even scratched the word "liar" into the door of his Jag. Really? I would never have guessed. He also owns a $900,000 Rolls, a luxury ocean cruiser and a $3million sub-penthouse apartment that isn't built yet. But then if you're a con that's trying to lure people, then the greater your advertised return, the better you have to make it look and this guy did it with style and to great effect.

The basic lesson here is "the greater the return, the greater the risk". I learned that at school in "home economics" (*sigh*...I show my age....) many years ago, and it seems to be one of very few things in the financial world that has remained steadfastly constant throughout that time. I may not know what a "good rate" is at the moment but I do know that 70% is laughable. Sure, some have managed to do exceedingly well at times, but a sustained 70%? Well even the great Mr. Buffett would have trouble with that one I think...


Dikkii said...

You know, Plonka, thanks to the time I've spent on re-organising my new PC, I haven't really ventured much into actual proper blogging for some time.

Expect to see something on Chartwell and also our broking woes sometime soon - I'm thinking of adding it to my irregular Great Debacles of our Time series.

70% is obscene. My initial thoughts on this one was "Ponzi Scheme". Thanks for jogging my memory, Plonka.

Plonka said...

Ponzi indeed. It just never ceases to amaze me that people see something like 70% and decide it's a good investment.

Donna said...

I just read your "70%" Story and
couldn't believe it. Was it PT Barnum whom said there's a sucker born every minute (or the verbal
equivalent thereof?) 70% return would be about 55% over where I'd start thinking "Hmm...something doesn't 'look right' there...."

Ha-ha- the Ponzi scheme came out of
NY from an Italian immigrant in the 1800's (?), I think...where else but in "America"?????

Plonka said...

I know, it's ridiculous isn't it? Like I said, I don't what a "good" (and by that I mean "safe") return rate would be here at the moment, but I'm willing to hazard a guess that 12% would be on the high side. And these guys dropped it all on a 70% chance. You'd be better off with a lotto ticket I reckon...

Dikkii said...

There's no such thing as a safe rate of return. Having said that, there's what could be considered "realistic".

I would say that anything that the major banks are offering at the moment on their online accounts is this. Anyone who offers a promised rate on anything other than cash should be avoided like the plague.

Now about that lotto ticket...

Donna said...

No if you "invest", there is no
absolutely safe investment. Even a
home isn't a "safe" one, as we're seeing up here. But that's another story- the economy in Okla. is VERY good, housing mkts are good, etc.

But what I do think, is that if you're putting $$ in stocks, etc., and you get 10-15% profit over time, that's very good. Of course "time" is the operative word- you have to be willing to ride it out OVER TIME. And people stupid enough to believe they're going to make 70% in a short(?) amt of time are, well, "stupid"(?)
uninformed(?) don't do their homework(?) aren't suspicious like I would be(?) too gullible/trusting(?)

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