Ajay Ahuja Blog Post on The Smart Money

Have you ever heard the saying follow what the smart money is doing? This is saying do whatever the smart people are doing.  The smart ones being the rich ones.  So invest where they are investing.

The smart money is ploughing in to residential and commercial property.  Why?  Because it is cheap!  Cheap being reference to what rent you can receive relative to what you have to pay for the property i.e. yield.

Not only is the smart money going in here but there are funds springing up all over the place promising you a return on your money from investing in property.  Sounds a great idea doesn’t it?

  1. hand over money
  2. do nothing
  3. wait 5 years
  4. get money back plus HUGE profit

Simple!  Well not really.   The first 3 parts are true.  Part 4 is the point in question.  Your money will get constantly eroded by:

  1. greedy fund managers taking a percentage every year for “management”
  2. greedy fund managers taking a large profit share of profits (if any)
  3. back handers paid by supporting businesses to manage the portfolio or rip off charges paid to firms connected to the fund managers which you do NOT get a cut of
  4. incompetence by inexperienced fund managers

I have seen these funds before.  They promise the armchair investment which you cannot argue with.  You certainly have to do nothing other than hand over the money and sign a bit of paper that says you understand that you can lose ALL of your investment.  Once they have that then the fund is happy.

Then they proceed to do just that.  The most prolific ones lose all your money.  The less prolific lose some of your money and once in a while a fund returns the investor’s whole capital without any profit after 10 years and a lengthy legal battle!

God I sound like a cynic don’t I?  well I suppose I do.  I have never seen anyone become rich by doing this and these funds just appeal to the lazy side of our personalities.

So when looking at these funds please bear in mind what I say.  There are another couple of sayings out there that go like this:

There is no such thing as a free lunch

If it is too good to be true it probably is

I will let you decide which one is more applicable.

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