All about investment

By Peter McGahan

You may have read about an investment called the ARM assured income plan that produces an income return of 10% and is not subject to the vagaries of the stock market - you may have thought that surely after ten years you would get your money back? Here are my thoughts.

I will use the ARM assured income plan to present the difference between marketing and research! For those of you who are not technically orientated you can switch off now as it's a full on no entry sign for me and any investor we would advise.

Anyhow onto the technical data. With the ARM assured income plan you are effectively buying an investment into a range of life insurance policies by U.S. policyholders who no longer want them.

These policyholders are aged over 65 and have a life expectancy of less than 12 years. The customer no longer wants the plan and rather than encash it they sell it to a manager for slightly more than the surrender value the insurance company is offering.

Your money is invested into the ARM assured income plan which buys these plans and then continues to pay the premiums until death and the death benefit goes to the fund. A large part of the gain will come if the life expectancy is shorter than the assumed twelve years life expectancy of the people they are purchasing the life policies from.

Excellent you might think. Where could it go wrong!? From here onwards is the answer.

Firstly and most importantly the investment falls outside the scope of the financial services and markets act. If ARM is unable to meet its liabilities you will have no claim to the financial services compensation scheme. i.e. you will receive nothing back.

Further risks to consider: What if people live way beyond those 12 years? If they do the investment fund has to maintain premiums for much longer, and as such profits could disappear completely, and the 'income' you are referring to could go with it.

Whilst the marketing part of the brochure talks up the investment, the risk element does the reverse. In fact the disclaimer on the internet for the ARM assured income plan states clearly that this investment is only suitable for "investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks, tax implications and merits of such an investment" (1)

The risks are further highlighted by the fact that the product you are effectively investing into is highly illiquid. I.e. in a difficult market if you have no buyers the price plummets, and worse still you may not have immediate access to cash.

The return of the ARM assured income plan is also down to each party involved meeting its obligations. There are lots of parties involved thereby catapulting the risk.

There is the chance that the insurance company who is providing the death benefit could be insolvent when the policyholder dies and cant pay the death benefit which would be an enormous challenge to the fund. Does a risk averse cash investor want this complexity?

The investment is also made in Dollars. If the dollar depreciates against the pound, most of your gain could be wiped out. Some investment provider's hedge against this but this plan does not.

Any borrowing or extra 'gearing' like this could substantially increase the risk an investor has and furthermore increases in interest rates will have a serious impact on the ARM assured income plan. If you consider the current interest rate environment and in turn the impact of quantitative easing, to consider anything other than increasing interest rates in the coming years is, well, a little mad.

Now you might see that the marketing brochure has a fine looking lady snorkelling, but if you are in anyway interested in time management just cut out the pictures.

Source:
(1) catalyst investment

About Peter McGahan and Worldwide Financial Planning:

Peter McGahan is the Managing Director of Worldwide Financial Planning - FT Award winning Independent Financial Advisers. Peter writes for many national and local press publications and is widely respected as an expert in personal finance.

Worldwide Financial Planning specialise in the provision of expert one-to-one advice in the areas of Mortgage, Business Finance, Investment, Pension and Retirement Planning and Inheritance Tax.

Peter McGahan is an Independent Financial Adviser and the Managing Director of Worldwide Financial Planning Ltd who are authorised and regulated by the Financial Services Authority. 'The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.'

Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.

The above represents the personal opinions of Peter McGahan.

All information is based on our understanding of current tax practices, which are subject to change.

The value of shares and investments can go down as well as up.

Article Source: http://EzineArticles.com/?expert=Peter_McGahan

Peter Leeds

Have you ever wondered why a penny stock falls sharply in price right after it achieves a major


There's an expression in the stock market that says, "buy the rumor, sell the fact." The idea is simple. When there's an outstanding rumor about an upcoming event for a company, investors buy in, thus pushing penny stock share prices higher. Once the event itself is actually realized, the share price loses that upward buying pressure, and the penny stock drops in value.

For example, ABC Inc. is likely to get FDA approval for their new drug. The upcoming ruling is widely expected, and many investors buy in, speculating that the announcement will send the shares skyward. This starts pushing the penny stocks' price up.

Once the actually FDA approval is officially granted, the shares don't spike much higher since the speculators had already run the share price up so much. Now that the announcement is out, many of those same speculators start cashing out, putting a great deal of selling pressure on the stock.

The following events are some examples of what might drive buying interest:
• impending patent award
• expected strong financial results
• new major customer or contract win that is widely anticipated
• upcoming release of a new version of their technology
• anticipated FDA clearance

Any such widely anticipated event would gradually push share prices higher. The penny stock would gradually increase, higher and higher, until the underlying event finally came to pass. Then speculative buying vaporizes, sellers come out of the woodwork, and shares start their descent.

For this effect to actually occur, the rumor or event needs to be:
• widely known
• growing in probability
• noteworthy (potential for a major impact)
• nearing the date it's expected to occur

"Buy the rumor, sell the fact," plays out again and again on the markets. It's certainly not the exception, but rather the rule. Keeping this in mind will help you identify penny stocks that may trend upward, allowing you to ride the shares up for profits. Just make sure to escape your position before they come crashing back down to earth, and more realistic valuations. In other words, buy the rumor, sell the fact.

By:Terry Mitchell

Here's an illustration of why attempting to the time the stock market is so perilous.
Let's say you are tired of all the recent losses and decide to exit the market when the DOW is at 7500, with plans to get back in when you think it is safe again. Then it goes up to 8000 and you start to believe that the worst is over, so you get back in at that point.

However, it turns out to be a "sucker's rally" and the DOW goes down to 7000. You panic and get out again. Then it goes up to 8500 and you think the market is surely out of the woods this time, so you get back in.

But you are wrong and ride the DOW back down to 7000 before getting out again. Then it shoots back up to 8500 and you swear you will not be fooled again, so you stay on the sidelines this time. Finally, being extra cautious, you let it go all the way up to 10,000 before finally being convinced that the worst is indeed over.
You are right – this time it is. But look at all the gains you missed out on and unnecessary losses you took by trying to time the market instead of staying the course.

Therefore, no matter how low it might go, I do not plan to remove my retirement funds from the market until I reach an age at which keeping them in would no longer be prudent, i.e., I wouldn't have enough time left prior to retirement to recoup any potential losses. And at that point, I would have no intention of re-investing in the market.


Terry Mitchell is a software engineer, freelance writer, amateur political analyst, and blogger from Virginia, USA. He posts a least one article a day to his blog - http://commenterry.blogs.com - on subjects such as current events, politics, technology, society and culture, religion, health and well-being, self improvement, personal finance, trivia, and sports.

You can now have any article and blog post he writes – in advance, if you would like – for use in your book, newspaper, magazine, ezine, newsletter, website, or whatever!! This includes the thousands of articles and blog posts he's previously written. Contact him via this website or his blog for details.

By David L Wells

Investing these days has become quite tricky, even treacherous!

There are bad investments all around us on a daily basis. The government seems to have a pretty good handle on bad investments as of late. They are spending $3.6 trillion dollars in the near future on programs we can only hope will help. Oh, by the way, that comes to about $25,573 dollars for each of our 139 million taxpayers. That's ok. Just put it on my bill, or better yet put it on my kids' bill.

Citigroup, for those who do not know, is the nation's largest banking institution. Chances are if you have a credit card or a mortgage, Citigroup is playing a part. Citigroup has been touted as the world's worst investment.

Former Treasury Secretary, Hank Paulson, made a terrible investment on behalf John Q Public. He purchased 7.8% stake in Citigroup for $25 billion dollars. Then he added guarantee's against 90% of future losses on $301 billion dollars in assets. Subsequently, we (taxpayer) injected another $20 billion dollars. So, for paying for about 100% of the market value for Citi, we got less than 1/10th of a company that was worth 1/5th of our investment.

Pretty good deal, eh?

That $45 billion dollar stake has a market value of just over ONE billion today. And, it's about to get worse. The Treasury Department has agreed to convert $25 billion of its preferred stock investment into common stock at Citi. This means the taxpayer's stake will rise to near 40% of Citigroup.

It's just another example of why these insolvent banks should be nationalized or FDIC Mandated, pre-packaged chapter 11, government funded reorganization.

David L. Wells
http://www.apg-llc.us
http://www.debt-negotiation-apg.com

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