The Cost of Investing - Are 'Hidden' Charges Eating Your Returns?

We live in interesting times.

The investment bank Lehman Brothers has filed for bankruptcy protection, Merrill Lynch is being taken over by Bank of America and it's predicted thousands of bank employees will be picking up their P45s by the end of the month.

If you have money invested in ISAs and personal pensions these may be worrying times. It's likely that you'll have a reasonable percentage invested in the UK, US and major economies' stockmarkets.

With the major indeces, such as the FTSE in the UK, falling, you may be wondering if you should be taking any action.

Should you leave the funds as they are?

Should you 'switch' funds to reduce risk?

And are the funds you are invested in actually performing when compared to funds of a similar nature?

One key aspect to investing is understanding the impact that investment costs have on your overall returns.

As you'll know, when you earn interest on your money in the bank, the return is 'net'. That is, there are no hidden charges that you need to be wary of. If the bank offers you 5% pa gross, you know you'll earn 4% after tax, or 3% if you're a 40% taxpayer.

The situation is not as clear when you invest in a mutual fund.

Let's look at equity ISAs (investing in Unit Trusts/OEICs) as an example.

The costs you need to consider are:

• Initial charge when you invest the money (could be up to 6%)
• Annual Management Charge, typically 1.5% pa
• Total Expense Ratio (TER), includes other costs including trustee fees, custodian charges, auditors, legal costs, printing and marketing, this typically adds 0.1 - 1.6% pa
• Fund Trading Costs, incurred when the fund manager buys and sells shares within the fund, can add 1 - 3% pa

The reality is that many investors are totally unaware that all these costs exist. Most will have heard of the first two as these are included in most fund marketing literature, but the last two remain a mystery to many.

The good news is that the fund managers are now required to disclose information on all these costs, which means you can now discover how much you are paying and what you are paying for.

Some investors believe that the TER includes all costs on their investment, but they are mistaken. The trading costs can, in some cases, double the ongoing costs to your investment.

When times are good and markets are rising, meaning the value of your investment is increasing, it's all too easy to overlook how much you are paying in charges. After all, you're making 'free' money so does it really matter how much they are making from you?

An easy trap to fall in to.

Now that times are not too 'hot' it could be the right time to question how much you are paying your fund manager. Whilst it's prudent to take the long term view when investing, this should NOT just be an emphasis on performance.

Reducing costs really does matter and could make a big difference to what your investment is worth in the future.

You may be thinking that relatively small percentages will not make much of a difference, however compounded over time you could be incurring some considerable cost.

As an example, let's look at a £100,000 investment over a period of 20 years growing at 7% pa. This would be worth £386,968 without

deducting any annual costs.

If we add in a TER cost of 1% pa the return would reduce to £320,713. If we increase the TER to 3% pa the return is further reduced to £219,112.

I'm sure you'll agree that this is a massive difference!

The Financial Tips Bottom Line

At a time when we are facing a period of slower economic growth and lower returns, investment costs and charges should stand out

like a sore thumb to the savvy investor. These costs do exist and may well apply to your investment funds today. Maybe it's time you found out the truth?

ACTION POINT

If you don't want to go through this research yourself, or simply don't have the time, then approach your Financial Adviser/IFA/Financial.

Planner (if you use one) and ask them to collate the information for you. Check what their charges will be for this exercise.

Once you have all the data, seriously consider what alternative investment options you have such as passive and index funds. In fact, the reality may be that you do not need to take any risk with your capital to reach your financial planning goals so it may be better for you to hold the money in cash.

Ray Prince is an Independent Financial Planner with Rutherford Wilkinson plc, and helps UK Resident Doctors and Dentists get the best deals on mortgages, protection and investments, as well as helping them achieve their financial objectives. Just visit http://www.medicaldentalfs.com to get your free retirement planning guide. Rutherford Wilkinson plc is authorised and regulated by the Financial Services Authority. Article Source: http://EzineArticles.com/?expert=Ray_Prince

Should You Buy a Property in Thailand?

South East Asia has always had a special appeal for me. I first began spending time there about 5 years ago. I love the organised chaos of the roads in Bangkok, the food that is cooked right in front of you, and the haggling at the markets. Amazing.

Altogether I have spent over 3 months in Thailand and I have so many fond memories, add to that the fact that it is halfway to Australia and QANTAS offers a stopover of only 45 minutes which gets you to Oz quicker. It's a great destination.

I usually spend a week stopover on the way back to the UK. It gives me a break after 2 gruelling weeks with the family and friends and the 2 hour massages for around £7. What more could you want? :)

So naturally l thought if I'm spending so much time here l might as well buy a property. Then naturally if I am prepared to buy and have done extensive research why wouldn't my investors also buy as well?

Having looked into Phuket property before the tsunami, I thought I would check out Pattaya (pronounced “Pat-e-ya”) which is only around 1 hour 20 minutes drive from the new international airport in Bangkok (the capital).

Pattaya is a seaside town (tick-These ticks and crosses are my due diligence) with a new highway which will mean it will only take around 45 minutes to get to and from the airport. (tick).

Pattaya has 3 distinct property markets.

The first is the local market. The properties are priced between 1 and 3 million Baht (70 Baht to £1) So £15,000 - £45,000. Sounds good right. Well maybe not. Unless you are a local it's unlikely you would buy at this level.

You could only rent to locals and the investment returns I don't feel would be great enough. (Cross)

The second and most interesting market is the 20 to 30 million Baht. £285,000 - £430,000. Incredible you say? Well thats what I thought too. In fact forget incredible — l was downright shocked. But this is the market of the off plan speculators. In my books, another word for 'speculator' is 'gambler' and hopefully you know by now what I think of gamblers.

I do believe you can make money on these, but only by 'flipping' before completion but obviously there are no guarantees with prices already so high. Incidentally, this market has seen an incredible amount of growth so that waterfront apartments are as expensive as central London, Sydney or New York. (Cross)

I feel that this market has been driven by paper gains rather than underlying fundamentals. I see this happen quite often, and it's one of the reasons I deal in properties 99% of people would rent.

The final level is the 5 to 9 million Baht. So £70,000 - £130,000. This is the retirees' and expats' market. You would be more than happy with these houses. 3-4 Bedrooms, large open spaces, ensuites, parking and best of all - air conditioning.

These I feel would be ideal for investment and present your best opportunities. (Tick)

Rentals are great as a lot of major multinationals have offices in Bangkok and the expats are happy to commute up daily or it's cheap enough to rent a place in Bangkok during the week while spending the weekend home in Pattaya. (Tick)

As an investor in Thailand the first thing you have to realise is that you cannot own land (Cross) so at present you have two choices: either buy in the name of a Thai company and have Thai nationals who own it (but you have a signed deed saying you can replace the Thai nationals at any time). It's a reasonably secure way of buying.

The other way and the way that is becoming more accepted is a freehold/leasehold similar to what we are use to in the UK. A lot of new builders are structuring ownership this way.

BUT… The Thai government has an unfortunate habit of changing laws so you may find yourself at the wrong end of a change. They made a decision early in 2006 that effectively stopped or severely curtailed foreign ownership (Cross) and the stock market began to spiral downwards so rapidly that they changed the law back by day's end. This sort of government backpeddling is a potential warning sign. (Cross)

The country has had 18 coups since 1932, although the past 15 years have seen none until 2006. Whilst they have all been peaceful coups, they still create political instability. (Cross) On the other hand a coup to a Thai person is probably like on of our Labour politicians voting with the Lib-Dems so it's not that big a deal in reality.

Most coups have been backed by the King. Thai people have an amazing allegiance to their king, wherever you go in Thailand you will see him, and as long as the King has backed the coup everything is alright. (Tick)

The King is the real power in Thailand, he has been an active participant and a representative of the people, and is a stable force in a thriving country. (Tick)

The problem Thailand faces is that the King is getting old and may one day pass the throne onto his young son who is renowned for irresponsible antics. So no one really knows just how he will take to the position of King or whether the people will take to him. This could cause an instability in the investment market. (Cross)

One of the biggest things overlooked when inexperienced investors seek out exotic new investment regions is how to get your money back. Oftentimes the capital growth is fantastic, so your £20,000 investment doubles and doubles again (so you now have £80,000). This is a paper profit until you actually sell it or remortgage it.

So the essential question is not often will I make money? but how will I get paid? or who will sell it for me?, who will buy it from me?, how much tax will l pay?, how much will I have leftover? Or if you don't want to sell it how will l make the equity work for me?.

Often the answer is you won't. You won't remortgage it and you won't sell it, or if you do you'll need to accept considerably less than you want for it.

In Thailand mortgages are very tight. The Asian economic crisis hit Thailand particularly hard, and in fact they've only just now started continuing a number of concrete highways which stood unfinished and vacant above the ground level. These massive highways stretch for miles with no entrance and no exits and are amazing to see.

The bottom line is Thai banks don't trust farang (foreigners) so you might be made to jump through hoops just to get a 50% mortgage. And if you thought getting a mortgage was hard, try remortgaging. So that kind of leaves selling as the option which kind of goes against our entire philosophy.

All in all, I decided that it would be better to rent out a 5 star hotel or villa on the beach for 2 weeks a year than to own a property which has so many variables.

If you are interested in buying in Thailand, you can definitely make some money but as always 'Do your due diligence?' I am happy to give you the research that we undertook before I went if you are interested.

Live with passion,

Brett :-)

PS. I love Thailand and if you get to go make sure you hire a bike and get out into the real Thailand rather than just around the cities and tourist places. The people are lovely and the food is soooo good.

Brett Wood is an author and property investor. He runs a successful property investment consultancy in the United Kingdom. His strategies have helped thousands of investors to get on the property ladder and build successful property portfolios. Originally from Australia where he was a successful mortgage broker he moved to the UK in 2002 and since then has build a massive portfolio of off plan and new build residential properties in the UK, Spain, Slovakia and Australia. For further details contact Brett Wood at http://www.yourpropertyclub.com or directly on 0870 042 1188. Article Source: http://EzineArticles.com/?expert=Brett_Wood

Mortgage Rates and the Lying Liars who Advertise Them

One of the most frustrating things about being an honest mortgage person is watching the dishonest ones get rich with deceptive advertising practices. Recently, I have seen more of this despicable activity than usual.

Both local and national companies are guilty of it. A large national bank recently advertised 30 year fixed rates at 5.5% with an APR of 5.6%. This was at a time when a rate that low would have required 2.5 to 3.0% discount points to achieve. And you sure as hell wouldn't get a 5.6% APR with that much discount being paid. The fast-talking announcer was literally yelling out the interest rates, but there was a small note in the corner of the screen (in low contrast colors) noting that these rates were effective on 1/31/08. Considering that the ad didn't come out until late February, they knew when they aired the ad that they couldn't possibly deliver what the ad promised.

Why would they do that, you ask? Simple. They want you to call. Once you are on the phone, they can point out that the information was dated, but they were still the best company in the whole world to deal with. In other words, they are perfectly willing to lie to you in order to create a selling opportunity. If it happens to you, hang up the phone and call somebody local who will give you a real rate quote that they can really deliver. Pick somebody who has been in business more than five years.

Here is the other headline that should send you running: "FEDS SLASH RATES, GET THE LOWEST MORTGAGE RATES EVER!" As I may have mentioned in previous articles, the Federal Discount Rate does not affect long term mortgage rates. These rates are generally closely related to the 10 year bond. However, variable rate loans including some home equity credit lines that are tied to Prime rate may be affected. Much more likely is that long-term mortgage rates will go UP every time the Federal Reserve lowers discount rates. That is exactly what has happened in the last two Fed rate reductions. Again, the proper response to this lie is to run away as fast as you can. They are LYING!

Jon Laird is co-owner of Sterling Mortgage Corporation, one of Arizona's oldest licensed mortgage brokerage firms. Sterling Mortgage Corporation has specialized in manufactured home loans for more than 23 years. Jon has more than 32 years experience in home lending and is a state certified continuing education instructor. He frequently teaches manufactured home financing classes for real estate agents renewing their licenses. To read more from Jon visit: http://www.sterlingmortgageloans.com Article Source: http://EzineArticles.com/?expert=Jon_Laird

How to Use a Debt Snowball to Propel Yourself Towards Debt Freedom

Have you decided that it's time to kick debt out of your life? Great! It's a simple process to get rid of debt forever; within a few years, you can be debt free! Get your debt snowball rolling, and you can do it!

The process of snowballing your debt is simple. (That doesn't mean it's easy...but you can do it!) First, why do we call it a snowball? Well, imagine those cartoons of small snowballs that begin rolling down a large hill or a mountain.

As the snowball rolls, it picks up more and more snow, so that by the time it reaches the bottom, it's a gigantic ball big enough to mow down or consume anything in its path. This is what we want your money to do for you.

The first step in creating your debt snowball is to make a list of all of your debts. Include car loans, student loans, consumer debt (i.e., credit cards), medical bills, home equity loans, etc.

Everything except your first mortgage is going to be gone, gone, gone! Now, line these debts up in order from the smallest balance to the largest. This is the order in which you're going to pay them off.

Ignore interest rates. Yes, the financial gurus tell us to get rid of high-interest debt first, but we're going for a lot of victories fast here. Please trust me on this! You'll be excited as you get that snowball rolling.

Now, the first debt on your list is your snowball target. Every single other debt on the list gets the minimum monthly payment for now.

The debt on the top of the list gets its minimum payment plus every spare cent you can throw at it. Pay it off as fast as you can. When it's gone (which should be soon, because it's your smallest), you take the money you've been paying to it every month and apply it to the next debt on the list.

Now, debt #2 is getting its own minimum payment, debt #1's minimum payment, and every spare cent you can gather towards it.

If you keep this system going on down the list of debts, your debt snowball is rolling, and after a few debts, you'll be amazed at how much money you're able to contribute to eliminating your debt!

Join our free support community for people who are working to get out of debt at Debt Free Weirdos It's weird to be Debt Free, start being weird today!

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

Consequences of Debt, Interest Rates and Undependable Foreign Currency

As the personal indebtedness increases, historically low interest rates have enticed American consumers to continue on their spending sprees and let their signature do the paying. Yet while Americans have signed on the dotted lines of home and car loans as well as countless credit card slips, the American economy as a whole is beginning to slip into trouble with the threat of foreign investors no longer sufficiently strengthening the dollar.

Perhaps heaviest on the minds of economists who have their fingers firmly on the pulse of the American people is the skyrocketing credit card indebtedness that robs consumers of their savings, thus taking away their ability to ride out an economic downturn. This in turn will lead to a floundering housing market, financially maxed out consumers, and a tanking economy that is no longer supported by spend-happy customers.

Perhaps hardest hit are retirees who find that their indebtedness forbids a life of leisure in the golden years. Adding to this problem are the deceptively inflated home prices that give many a homeowner the false security of living in a steadily appreciating investment when in fact many have refinanced their debts to take out cash so often that precious little of their equity remains.

Of course, the biggest wildcard in the equation of fiscal consequences is China with its generation of a trade deficit while at the same time holding several investments in the United States. Gradually America's opens itself up to the reliance of China's goodwill since with a few chosen financial tactics it could very well overturn the entire US economy.

Political Polling Websites: State Polls and State Matchups. Article Source: http://EzineArticles.com/?expert=Eshwarya_Patel

The Supervisors 14 Essential Truths For Communicating With Direct Reports

One amazing, but sadly true, fact of today's advances in communication tools is that we really don't communicate much better than in the past.

Indeed one recent study determined the number one advancement in communication tools was the availability of cheap on-line airfares.

The airline trip was needed to clarify some earlier communication sent out electronically!

Therefore a Manager/Supervisor must be able to clearly communicate to his/her direct reports in an effective manner.

The following are 14 essential truths you must understand in order to improve your communication skills.

1. Focus--When someone is talking to you, STOP what you are doing and thinking. Face the person talking, devote 100% of you attention to both the person speaking and to what is being said.

2. Listen--Don't just "hear" the words being spoken. Listen to what and how the statements are being said. Observe body signals and facial expressions.

3. Attention--Don't let your mind wander. Let the person finish what they are saying, then take a few seconds to think about what your response will be.

4. Paraphrase--When the person is finished speaking repeat back in your own words what you heard. Ask the person if you have an understanding of what they said.

5. Empathy--Be aware of the other person's needs. Everybody has different needs, wants and desires. Be cautious about substituting your needs for theirs.

6. Ask--Don't tell. Telling quickly gets the other person on the defensive. Save your comments and guidance until you totally understand the question and the situation.

7. Be Open. --Don't criticize, pass judgement or preach. Make objective conclusions about alternate ideas, people and situations. Be careful of attaching or offering your values too quickly, if at all.

8. Advise--Watch the temptation to "give" advice. Only "offer" advice. It's always better to say something like "I suggest we..." and not "Here's what you need to do".

9. Trust--Is what open and honest communication is all about. Without trust teams can't function properly, people will loose respect for each other. Without trust you are building a house of cards that will eventually tumble down. With trust teamwork and cooperation are much easier to achieve.

10. Equity--Both parties must feel equal. While at first reading this may seem an unusual requirement in the Supervisor and Direct Report relationship. However even in this situation the relationship should be equal on the personal level. By using equality in speaking, you avoid the dreaded condescending speech.

11. Comfort--While stress and tension may be surrounding the conversation learn to be comfortable with yourself and the message you are about to deliver.

12. Interest--Strive to have a genuine interest in others. Everyone has a story to tell and most of the time it is an interesting one! Talk in terms of what the other person is interested in. The familiar quote of "In order to be understood, we must first seek to understand others" is very true. Practice it.

13. Motivate--Always be looking for ways to motivate others. Use positive reinforcement often. Look for ways to offer praise and recognition.

14. Humor--Take life seriously, not yourself. Life is too short to go without a constant stream of humor. Look for it.

© 2004 John Robertson, All rights reserved

This newsletter may be shared with others in its entirety. However credit must be given to John Robertson and the following text must be included. John Robertson is currently the Training Manager for a major wireless carrier and has over 30 years training and training management experience. While not at the office his interests include woodworking, metalworking, hunting, fishing, and the outdoors. He is also a part time videographer and produces How To DIY Videos. Check his website http://www.TinkerJohn.com for more ideas and plans. Article Source: http://EzineArticles.com/?expert=John_Robertson

Reverse Mortgages Learn The Facts First!

Reverse Mortgages, Most Common Features:

Many offer special appeal to older adults because the loan advances, which are not taxable, generally do not affect Social Security or Medicare benefits.

Depending on the plan, reverse mortgages generally allow homeowners to retain title to their homes until they permanently move, sell their home, die, or reach the end of a pre-selected loan term.

Generally, a move is considered permanent when the homeowner has not lived in the home for 12 consecutive months. So, for example, a person could live in a nursing home or other medical facility for up to 12 months before the reverse mortgage would be due.

However, be aware that:

Reverse mortgages tend to be more costly than traditional loans because they are rising-debt loans.

The interest is added to the principal loan balance each month. So, the total amount of interest owed increases significantly with time as the interest compounds.

Reverse mortgages use up all or some of the equity in a home. That leaves fewer assets for the homeowner and his or her heirs.

Lenders generally charge origination fees and closing costs; some charge servicing fees. How much is up to the lender.

Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.

Because homeowners retain title to their home, they remain responsible for taxes, insurance, fuel, maintenance, and other housing expenses.

Getting a Good Deal.

If you decide to consider a reverse mortgage, shop around and compare terms.

Look at the:

Annual percentage rate (APR), which is the yearly cost of credit. type of interest rate. Some plans provide for fixed rate interest; others involve adjustable rates that change over the loan term based on market conditions, number of points (fees paid to the lender for the loan) and other closing costs.

Some lenders may charge steep costs, which your lender may offer to finance. However, if you agree to this, you'll take out fewer proceeds from the loan or you'll borrow an extra amount, which will be added to your loan balance and you'll owe more interest at the end of the loan. Total Amount Loan Cost (TALC) rates.

The TALC rate is the projected annual average cost of a reverse mortgage, including all itemized costs.

It shows what the single all-inclusive interest rate would be if the lender could charge only interest and no fees or other costs. payment terms, including acceleration clauses.

They state when the lender can declare the entire loan due immediately. Under the federal Truth in Lending Act, lenders must disclose these terms and other information before you sign the loan.

On plans with adjustable rates, they must provide specific information about the variable rate feature.

On plans with credit lines, they must inform the applicant about appraisal or credit report charges, attorney's fees, or other costs associated with opening and using the account.

Be sure you understand these terms and costs.

For More Infomation On Reverse Mortgages Visit: Debt Elimination Program Reviews They review and then list some of the best debt elimination, programs, software and books available online in 2005, Including Free Articles, Special Reports and More!

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