I’ve had a number of investors come to me lately with their statements and portfolios, who have told me about this investment that is paying them 9.65% on their money, it’s an ICON Leasing Program. Fund Number 11. Their current advisor has placed them into an investment product which is paying them 9.65% on their money, or so they think. I’ll get to that later.
When I hear about high yielding investments I always do a double take. Something high yield generally means something high risk… Think about General Motors, not long before the firm went into bankruptcy some of its Corporate Bonds were yielding 10, 15, 20% and more, the same bonds when they were first issued were paying 6%, however, as things started falling apart at General Motors, yields started rising. These bonds were good investments at one time, but became highly risky investments overtime.
So what to do when someone offers you, 9.65%, 7% or even 6% in this current low interest rate environment? 1. Don’t be afraid to get a second opinion before you invest. 2. Double check the information yourself. 3. Read the fine print. You’ll be surprised what you will find in the fine print.
Here is an example of what you will find in the fine print: Generally in PA, when an individual invests in a Real Estate Investment Trust, like Inland for example, or an Equipment Leasing Partnership, like Icon for example, or Oil and Gas Partnership, like Waveland, the most that an individual can place into one of these investments is 10% of an individuals liquid networth, (NOTE LIQUID), this disclosure is located in the fine print of the prospectuses for each of these types of products. Liquid means, all those assets that can easily be converted to cash such as, stocks, bonds, mutual funds, cd’s, savings accounts, checking accounts etc… NOT your home, car, furnishings, holiday home, etc… Once an investor invests in one of these products, that portion of their portfolio is no longer liquid, because these investments are classed as illiquid.
Unfortunately, the investors that I’ve met and spoken with lately had more than 10% of their liquid net worth invested in the aforementioned investments at the time of investing, indeed they have had their liquid net worth amounts inflated by the “Investment Advisor” at the time of investing so that their he/she could place more money into these investments, (meaning more commission for he/she) and cannot get their money out of these illiquid investments.
Now getting back to that 9.65%… Even though these investors were guaranteed this interest rate on their monies by their “Investment Advisor” for all the years they owned the product, unfortunately, the actual interest period was only about 12 – 18 months. According to the investor relations department of the investment product that they are invested in, Icon Leasing, after the interest period, the distributions that these individual were receiving each month comprised mostly their original investment, and a tiny part of the interest that was earned. Actually, no one in the investor relations department could tell me how much the real interest rate actually was.
No matter what you invest in, your goal should be to find safe, sound, secure solutions for your money. Don’t be afraid to get a second opinion, after all it’s your money. Don’t fall for the “Bill and Melinda Gates” invest in this, or “George Soros” invests in this, or “Warren Buffet” invests in this… maybe it’s the right investment for them, but it may not be the right investment for you. Sing after me… “you’re just too good to be true.”