What would YOU have done? ( Archived) (15)

Risk takers - are they BRAVE or STUPID or just plain GREEDY?

This is a real life situation:

On Friday 13th March 2009 there was the opportunity to buy a 'perpetual' (i.e. no maturity date) bond denominated in euros paying 4.95% at a bid price(what the client pays) of 15.5 cents to the euro.

This means you would only have paid 155 euros plus 1.55 euros commission per 1,000 euros of this bond.

Normally the higher the 'coupon' (interest) rate the higher the risk (NOT a high coupon rate in this case) - also, normally, a low the market price is indicative of higher perceived risk (true in this case, but the bond is actually a much lower risk than the market price on 13th March indicated*).

What would you have done?

Would you be scared of the perceived risk?

Money can be a dry and boring subject to many, yet most of us need money to live!

The love of money is, I believe, evil -

but if you make money because you need to spend it on something worthwhile then it can be fun!

I'm really interested in what people perceive as a worthwhile risk if they are determined to reach a goal in life.

P.S. * Regarding the perception of risk I mentioned this same bond could be sold for 28 cents to the euro on Friday, 3rd April 2009 and would now cost about 30 cents to buy (instead of 15.5 cents) and is nolonger, in my opinion, a 'bargain'.......

The most I risk is a weekly Lottery Ticket with my Motza

Good morning Rusty,

Personally any "investment" in the finance world is extremely risky at the moment.Here in Spain there are so many expats with money invested that has gone down the tubes they are having to sell for peanuts and return to the U.K

I'm wanting to sell also but have to reduce my price to come in line with all the people trying to sell second homes with a mortgage.It's not funny for anyone at the moment especially pensioners!

Invest in 'James Bonds' instead!

Perceived risk is just that!

10% of bonds 'defaulted' in the 1930's............ I am making the assumption that 20% will default in this recession - apart from that it is a fantastic time to invest - 'safe as houses' people say but I know many who are in your position and it is definitely not funny..........

Timing is everything. I told a dear friend when she sold her UK house at her asking price less than two years ago that then was NOT the time to reinvest in property but it was what she knew and trusted - if somebody had realised the equity on their property then and rented for a couple of years and invested there money once the bottom had fallen out of the financial market they would be worth at least four times what they were worth two years ago!

I'd not invest in property even when it hits the bottom; I'd wait for it to have gone up for a few months first - anyway, I'll go on what Buffett says, which is:

'The purchase of a house should be primarily to live in and NOT as an investment - only buy what you can afford, and enjoy living in it!'

Agree with what you are saying entirely.Now is not the time to sell,but I have to move on, am mortgage free so in retrospect not losing a thing financially.I will certainly not being buying again and intend to enjoy the fruits of my labour in other ways.

If people think that the housing market will improve in the next year or two they are in for a rude awakening.

I had a buyer at my asking price last June.

I declined to exchange contracts at the last moment (it represented my only security in life at that point in time).

I committed financial suicide by not selling, and will probably keep that property (in the UK) for at least another 4/5 years.

Put it this way - if I'd invested the profit from selling that house just nine months ago I could have made enough money to buy at least three similar houses now!

What's that old saying?

'Practive what I preach NOT what I do!'

Do you mean Bonds underwear we sell here?

Money is a great help in life but sometimes we get our priorities wrong.As long as we have enough to see us through,health and happiness are so much more important.I gather from the threads you have happiness in your life and seem to look "robust"
There is an old saying "There are no pockets in a shroud"

Good luck to you and yours.