10 Lessons To Be Learnt

The Daily Telegraph's Emma Simon looks at the lessons to be learned from the stock market. Link


1. A guarantee is only as good as the guarantor

Structured products may have been guaranteed by Wall Street investment banks. But once Lehman's went bust, people realised that many of their guaranteed investments were not as guaranteed as they thought.

2. Don't buy something you don't understand

Financial advisers often point out that many people drive a car without fully understanding how the engine works. But those who got lost money in split-capital trusts and precipice bonds will no doubt now think twice before being reassured by such twaddle.

3. Higher returns come with higher risks

If you want to better returns than a building society account, you need to take more risk with your money. This almost always means you could also lose capital.

4. Don't pay more than you have to

The advent of the Internet and price comparison sites mean people can now shop around for financial deals and compare prices and products more effectively.

5. Long-term investments do not always mean long-term gains

Just because an investment should be held for a minimum of five years, does not mean you will get a positive return at the end of this period.

6. Ask how your adviser earns his money

Commission skews judgments; it pays to inquire why comparable products are not being recommended.

7. Read the small print

Vital information is almost always in the small print.

8. Don't rely on easy credit

Many assumed cheap loans, remortgages and interest-free credit cards would bail them out of any financial difficulty.

9. Don't rely on others to provide a pension

If you want a decent retirement, start saving.

10. What goes up also comes down

Shares prices can plummet, house price can fall, and interest rates can tumble  as well as rise sharply too. It's best to plan for such eventualities. They almost always happen.

"To make no mistake is not in the power of man; but from their errors and mistakes the wise and good learn wisdom for the future." - Plutarch