An Investment Banker Iddrisu Mahama has cautioned investors to be mindful of unrealistic rates offered by financial institutions on some investment portfolios.
Mr. Mahama says though such rates are enticing to customers, they usually turn bad as they have high risks and are short lived.
“When you are looking for returns, first of all, think about your principal. That is why when people run down or go down everybody goes and say, I can’t even get my money that I gave them”.
“When you give somebody money at a very high rate, he gives it to somebody who is hungry for money at any rate. That’s when your risk increases.” he stated.
He warned that investors may lose their entire investments in extreme cases.
SpeakingCiti FM’s consumer programme Business Today, Mr. Mahama cautioned investors to be mindful of such rates to avoid losing huge investments.
He explained that a lot is required in finance to properly ascertain the risks of investment before funds are released.
“You have an only real rate of 12%, even that one, your problems are more than the 12% return over the three years. The person who is taking it takes it at 80%. He is looking for somebody who needs to use the money. He puts his margin on it, build up his cost and it goes to 36% and then somebody goes for loan, he comes to complain that the rate is very high.
“It is the buildup of all these cost that leads to that. But it also depends on the company whether it is making super profit or abnormal profits to the detriment of the rest. By the time you realize you are standing alone. Those returns are for a short period. In the long run, everybody will start suffering because of such kinds of interest rates.” he explained.
He advised investors to take little risk to secure their investment future.
“That’s why I said you have to take little risk so that your money is given to very competent companies that need it. Such are the financial houses and banks so that when you need your money it is easy to write to the bank to retrieve it,” he advised.
By: Jessica Ayorkor Aryee/citibusinessnews.com/Ghana.