Returns are in for last year and for equities they weren't the best.
In fact, for equities they were the worst in seven years. That's the importance of being diversified. Fixed interest listed real estate and cash helped smooth out the share market drag of the final quarter.
There was one country where the share market knocked it out of the park last year – up an even 100 per cent. Just as it was up 100 per cent in 2017 and 2016 and each year as far back as the data goes.
North Korea.
How could this be? Well this is North Korea, where the previous leader, Kim Jong-Il, authored 1500 books in three years. The first time he played golf he shot 38 under par for 18 holes (with 11 holes in one) before promptly retiring from the game.
He also invented the hamburger. The Kims have also mastered the art of never needing to use the toilet because their bodies are so well calibrated!
If you believe any of that, you'll probably believe North Korea's share market has produced an average annual return of 100 per cent. The truth is North Korea has no share market, being a command economy. The government will invest where it sees fit. Most likely in statues and boondoggles offering tribute to the ruling Kim family.
For nearly everyone, the tale of a 100 per cent yearly compounding North Korean share market wouldn't pass the sniff test. It seems like some sort of claim they might make – if they had a share market, but we've long been encouraged to see North Korea, while horrific, as more of a strange joke, worthy of ridicule. Any claim they make about their success or brilliance is understood to be false.
If someone cold called offering the opportunity to double your money with a great opportunity in the burgeoning North Korean share market, most people would hang up the phone without question. Temper those claims a little and the cold caller might hook a fish.
It's the time of year when consumer protection organisations around the world are releasing details of how many people were scammed over 2018. Among the stories filtering out are a 78-year-old lady from Western Australia who lost $30,000, a young man from Montreal, Canada, who lost his inheritance, two people in the UK who each lost over one-million-pound pension sums and an 85-year-old from Hong Kong who lost $74 million in a gold trading scam.
The common thread in every one of these losses? Cold calls. In every case someone picked up the phone to be offered a great opportunity, or in the case of the 78-year-old in Western Australia, the chance to help catch scammers! She was encouraged to send money to Thailand and coached what to do if her bank questioned her. A similar story to a senior in Canada who was coached in what to tell bank employees if questioned when sending money overseas.
The other commonality? As noted by the country spread, the scams aren't limited by borders and can often be variants of similar ruses. In the instance of the young man from Canada, he was tempted by the offer from someone calling from a place called HQ Broker – a name that shows up on ASIC's Money Smart site as a potential scam. While people in New Zealand, who've been cold called, can be found asking questions about the name 'HQ Broker' on social media platforms.
The investor initially deposits a small amount and all the trades prove to be winners. That's proof of concept in the investor's mind, so they then deposit significantly more money and the updates on their trades begin to slow. Money swiped. All the 'trades' were fake.
And it's not just cold calls. This was sent to us recently after a client clicked on an online ad.
"Shark Tank's Biggest Deal Ever Could Make You Rich in 7 Days!" – Two university friends made Shark Tank history recently when they pitched their market analysis software, The News Spy. The idea is simple: to help normal people find the perfect investment opportunity for massive returns! They claim it works even if you have no investing or technology experience.
Called the New Spy, it claims to be a software program that scans the news to predict what stocks will do next, reacting to the news and making you a fortune. Just send money! It's fake and seems to be variant of a similar scam about last year when ads started popping up online. It was using images from the Shark Tank show to claim 'the sharks' or investors on the show been in a bidding war to back the software. Initially then the focus was bitcoin and cryptocurrency. With bitcoin on the nose, it seems the focus has switched to trading shares and foreign currency.
Derivatives of the share market trading software have persisted for years, but the danger now is the scammers having a larger audience and a platform to legitimise themselves. They can now buy ads to appear on Google, Facebook and Twitter, without a lot of oversight. Anyone with some computer nous can set up a legitimate looking website for their ads to redirect to. On that website they can weave a story together claiming they've been featured on major TV shows – instant credibility.
How can this be countered? Well it can't. It will keep coming in waves and waves and the scammers understand the best targets. Those likely to be getting access to large amounts of money for the first time – retirees around the world accessing their superannuation or pensions. Mix in a lack of financial and investment awareness, and is shown, people are susceptible to lose a lot of money.
Keep a check on anyone likely to fall prey but understand it won't always be who you think. In 2012, the Australian Crime Commission released a report showing the most likely person to be scammed was a male in their mid-50s, who was highly educated and financially literate.
In other words, everyone needs a reality check from time to time.
Maybe an easier way to keep people safe would be spread the word that every cold caller and investment opportunist originates from North Korea. Nothing is likely to make them seem less believable faster.
• Nick Stewart is the CEO and an Authorised Financial Adviser at Stewart Group – a Hawke's Bay-based independent financial advisory firm based in Hastings. Stewart Group works with individuals, families, and businesses in New Zealand who are committed to pursuing financial planning and wellbeing. Our clients understand the value of independent, goal oriented and objective financial advice that is free of conflicts. If that sounds like you, we would love to hear from you.
• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961.
