If it looks too good to be true ...

Nothing riles Money founder Paul Clitheroe more than the fraudsters who continue to steal investors’ money

- PAUL CLITHEROE

I am absolutely over people losing their money. Way back in the late 1970s and early 1980s I started writing and doing radio segments on investment. A lot of this was about the positive aspects of saving and investing: using savings to pay down high-interest personal debt, saving to buy a home, paying off your home loan, buying a well-located investment property or some good quality shares.

Over 40-plus years, these commonsense ideas have generally worked a treat. I say generally, because none of us has a crystal ball and with investments there are inevitable disasters. At a personal level, most of my property investments have worked out well. But along with a few of my university buddies, in about 1984, I bought a property for the grand sum of $21,000 in Tawonga, near Mt Beauty, Victoria. We thought we’d build a ski lodge to enjoy as a group. We knocked down the house, made no further progress and after a decade of spending over $1000 a year on rates and blackberry slashing, we sold it for $10,500, achieving the near impossible. We paid cash for the place, had no debt and after allowing for our running costs lost in excess of the $21,000 we had bought it for!

With shares I have always encouraged people not to take stock-specific risk, meaning owning just one or a few shares. This is a mug’s game. Diversifying risk with shares by owning many companies across many sectors, such as banking, retail, health and mining, is a no-brainer. And, sure, quite a number of companies I have owned over the years have failed or been a dud. But the average rate of return on a decent share portfolio, including the inevitable duds and failures, has been around 10%pa.

Different types of loss