Our financial system is getting too complicated
I’m an investor and I love to learn things on how I can grow my investment. But I must admit one thing, the options available nowadays are fast becoming overwhelming for me. Every year, there will be new types of investment for us to go into and some of them can be very very complex.
So what do we do when we don’t understand such things? We leave it to the experts!
Unfortunately, experts are being called experts because of few things and one of them is that they don’t come cheaply. So we end up paying some of our $$ in order to have these experts manage the complicated stuff for us.
To be honest, I feel that all these new types of investment only benefit none other than the financial institutions and the people working for them. For an investor, the return has been lowered due to the number of layers which appeared out of nowhere, in between the investor and the money they invest in (the experts are in some of the layers). The more complicated an investment type, the more layers there will be, and the more money they will charge you.
So most investors end up in a dilemma, we are paying people to reduce our return of investment. And then we start to complain about the low rate of return. Yet, most cautious investors do not dare (some are lazy) to venture outside and control their investments themselves.
What’s next then? Well, my advice to you is simple. If the financial system comes out with very complicated things, and if you cannot understand, then don’t go into it. Don’t ever pay someone to manage for you because the return of investment will be so low that, well, it’s better to just pump into Fixed Deposits. If you want better return, then manage those investments yourselves unless you are so rich that you wouldn’t mind those additional charges. But that’s another issue altogether.
Conclusion, manage your own investments if you want better return (higher risk though so you must know what you are doing) but if you prefer to let the experts handle things for you, then be prepared for very minimal returns.
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Comments
@ Damien
Yea, the money changes hands unlimited of times…and each time, the “value” goes up. But the actual value remains. Funny how something worth 10k can actually be priced at 100 times that amount.
And the interest rates, service charges fr those ‘banks’ and ‘experts’ actually go up with the ‘value’. 
No wonder everyone wanna be in the finance industry.
Anyway, in regards to Goldman Sachs, I think they didn’t receive a heavy enough punishment. If a small boy goes steal the toy from another boy and he only receives a short lecture….he will of course go for it again. No pain, easy gain.
I am fascinated by investment schemes where money changes hands but no real value-add is ever seen in the industries they “invest” in. The only thing I can see are players making a few bucks as money changes hands. So I ask myself, what do investment managers do? Make money change hands as often as possible or park it in companies so that they grow?
Goldman Sachs emerged as the winning bank in the US recession, making billions in the latest quarterly profit. But I wonder why no one actually wrote about the actual tangible value they generated while making those billions. How many jobs were created for example, or how much manufacturing output was increased as a direct effect of its investments? Was there actually any tangible benefit to society or were they just making a few bucks for “investors” and itself?
I read reports that Goldman has decided to go back to high risk investments again as what they did before the recession.
I’m no expert but it seems we haven’t really learnt anything. And worse, the whole country (USA) is cheering them on for learning nothing.