Beware of out-performance promises
New products promising high returns for low risk are often too good to be true, according to Australian Unity Investments.
As market sentiment improves, investors are likely to be enticed with a wave of products offering sizeable returns for minimal outlay, Australian Unity Investments (AUI) head of portfolio management Edward Smith said.
However, “the risks associated with such strategies are not always obvious, and typically are revealed when it’s too late to reverse,” according to Smith.
“Wise investors are very circumspect about new products or structures that offer tax or other advantages to enhance returns, as they can be dangerous to their financial health, especially if they are difficult to understand,” he said.
“Tried-and-true strategies that involve setting objectives and ensuring a diverse portfolio might seem boring, but boring is good when it comes to managing the life savings of most people.”
Smith said the best approach for advisers was to weigh up the long-term risks and potential rewards, in line with what the client is seeking.
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