Would you take a guaranteed annual 10% ROI?

I have an opportunity to put some money into a UK based business that will provide a guaranteed 10% ROI that I am able to compound each year. I was thinking of putting a portion of money into this project as a diversification strategy. I have been watching the business operate this program successfully since 2009 and they are looking to increase turnover from 24m to 40m sterling this year. What do people think?

10% would beat a lot of LIC's/ETF's right?

 

Let me check the list of guaranteed things in life:

1. Death

2. Taxes

3. New companies guaranteeing 10% ROI

It's on the list! Go for it!

 

If it sounds too good to be true right.....

It is a private company involved in quick property acquisition and development. The rate they can get for loans when needed is 12-15%, so they offer 10% to private investors which allows them to save the 2-5% to use in the business. Basically I am buying into the business (even at a small level) and backing them to be successful in what they do.

I have a small amount of cash (approx 10k) left in a UK account that I haven't touched since I left in 2012, so I thought instead of doing nothing with it, I would put it in and see what happens. If it doesn't work out, I have lost only a small initial investment I was doing nothing with. If I'd done it when I left the UK, I would have 16k by now! This must sound totally naive and stupid to all of you experienced financial and business people?

 

10% return and it's absolutely guaranteed? I'm going to sell my Ostrich and Timbercorp investments, invest in this and retire right now! Where do I sign?

 

Without a moments thought I would....

 

@Hazey Do you have a mortgage over here? Do you have an offset account? Do you work?

Assuming you earn over $37k per year your 10% return o the UK investment would be 6.75% after tax.

Assuming you have a mortgage with offset and earn at least $37k per year (thereby paying 32.5c tax in the dollar over $37k), then bring the money over here instead and dump it in your offset.

Assuming your mortgage rate is circa 5% you're rate of return would be GUARANTEED the same as your mortgage rate, i.e. about 2% less that the UK "scheme" give or take, and essentially risk free, plus your capital is not at stake, its just sat in your bank account.

 

Not to me,,You could do more bang for the bucks,with a higher turn-around %$ rate with your 10k in Australian Dollars and target outside the box thinking in new companies listings on the ASX on any day or 16 week turnaround and your money is within Australia..

 

Hazey, for this situation, or any in the future like it, think of it this way:

1. People do not offer free lunches in the investment world

That's it.

Now thinking about this situation with what you have described, it seems banks will only lend money to this company for a very high interest rate (12-15%). This means that the bank assigns alot of risk that it will not be repaid in full on its money, especially as the cash rate in the UK is minimal.

So what this company is asking of you is to take on that same risk but at a lower rate. If you are lending to them in the form of a loan, then you are simply another creditor. You make the interest rate, but run this risk of getting nothing. And you are happy with taking on more risk for that return than a bank's risk management team would.

If they are offering you equity, then that's even worse, as equity investors should demand a higher rate of return that lenders. This is because creditors of a company get money before equity investors in bankruptcy.

PP

 

Guaranteed 10% annual return! For 9 years!

Disclaimer: Capital may or may not be gone after 9 year investment period.

 

Every pyramid scheme needs to grow perpetually... red flag 1

Gauranteed return.... red flag 2

Fixed 10% return YoY.... red flag 3

Equity offer.... red flag 4

Without even seeing a PDS this looks like a winner

 

To answer your original question, yes, I definitely would take a guaranteed 10% return. Shame that you haven't mentioned one yet. I would drastically reduce my offset and buy whatever investment that could guarantee this.

 

Sophisticated investors don't need PDS's anyway...
Go for it.

 

Jaysus...and I thought there were a lot of acronyms in healthcare!!!

Pretty much a late starting, finance newbie here, so excuse my stupidity. So my next question would be; when I return to Australia can anyone recommend a financial advisor?

 

I am an Aussie by birth and hold UK citizenship after living there for 11 years now live in Timor-Leste. I am non resident in both Australia and the UK hold no property there, so no offset account to drop the cash into.

 

What about companies that guarantee 11% but only deliver 10%?