In reading Genesis 27:35-36, I am reminded of the saying, “Fool me once, shame on you. Fool me twice, shame on me.” We see that Esau has been caught off guard twice by his twin brother, Jacob. Deception is clearly not a new concept.

In today’s society, deception continues to run rampant. If we are not careful, we can be misled by the very people we are trusting for advice. Let’s consider three signs that a venture we are considering may be a bad deal.

There is high profit potential

While there are many business deals that have the potential to be highly profitable, we must carefully evaluate that potential relative to the specific industry.

For example, let’s look at real estate. If an opportunity comes up and the purchase price of a home is said to be listed at half of the actual market value, we should do some additional research. We might ask the following questions: What is the condition of the property? How is the neighborhood? How was the actual market value calculated?

This list of questions is nowhere near exhaustive, but the point is that this may not really be an opportunity to double our money. It might take several thousands of dollars to get the property ready to resell. The neighborhood may have some challenges that have driven the resale value down. The actual market value may be based on inaccurate information.

If someone gives us a tip that investing in a business venture will provide us a 25% return on our investment in 6 months, we have to ask questions. These numbers are unusual – not normal. We have to dig deeper to make sure that the investment is sound.

Solomon shares with us in Proverbs 14:15, “A simple man believes anything, but a prudent man gives thought to his steps.” (NIV)

We haven’t considered the risks

There is risk in everything we do. We just have to decide if the potential return is worth the risk we need to take. If our solicitor has not outlined all of the possible risks, we should determine them for ourselves. In the real estate example, we run the risk that homes may not be selling quickly in the area. There is a cost to holding on to a property while waiting to rent or sell it. There is a risk that there are unknown repairs that need to be corrected before renting or selling. Lack of disclosure does not mean that it doesn’t exist.

In the business venture example, there is a risk that the actual profits are less than 25%. There is also a risk that the principal may never be returned. Is the business operating both legally and ethically? Is there any additional liability when participating as a financial contributor? These situations should all be considered before determining whether to become involved.

We have to decide quickly

Salespersons thrive off of the pressure they throw our direction. By creating a sense of urgency, they can often get us to make a decision that we may later come to regret.

We can all think back to at least one time where we made a decision in haste, only to later realize that it was not the best option.

Anything that is meant to be will happen. If it’s in God’s plan, it will come back around. We should never feel pressured to act so fast that we are not careful. Proverbs 28:20 tells us, “A faithful man will be richly blessed, but one eager to get rich will not go unpunished.” (NIV)

We have to trust God to provide for our needs. We cannot get so eager to get rich that we act irrationally. It will come back to bite us.

As new opportunities present themselves, let’s carefully evaluate them to consider the true profit potential and the risks involved. Let’s not feel pressured to respond on someone else’s time schedule, and seek God’s assistance as we prayerfully consider how to proceed.

This article aims to aid in the education of the novice investor by investigating Tracker Funds. The key features are presented alongside the influential risks and benefits of this form of investment fund.

What is are they?

A Tracker Fund is an investment fund which aims to replicate the performance of, and achieve the same returns as, a specific market or index. They do this by investing in all or a representative selection of the companies listed in that index.

They work to match, or “track”, the performance of any of a number of worldwide stock market indices (such as the FTSE 100 Index) and are not actively managed by a fund manager. As a result, they are a form of passive investing.

Put simply; Tracker funds are investment funds that simply track a stock market index to match its overall financial returns. The value of the can go down as well as up, so you may get back less than you invested.

Benefits

Due to the fact that they are a form of passive investing they require less management commitment and as such incur lower costs. For example, whereas active funds have annual charges of 1.25-1.75 per cent, trackers have annual charges of 0.5-1 per cent.

They also offer investors with an investment approach that is simpler and easier to understand than many of the alternatives. This is because once an investor knows the target index of the fund, the specific securities that that Tracker Fund will hold can be determined directly.

Also, because index funds are passive investments, the turnovers, i.e the costs for selling and buying of securities by the fund manager, are lower than actively managed funds

Risks

The principal risk or disadvantage is that they cannot outperform the target index. As explained above, a Tracker Fund by definition aims to match rather than outperform the target index. Therefore, even one that is well-managed will not generally outperform the index, but rather produce a rate of return similar to the index minus costs.

It must also be understood that over the last decade Tracker Funds have followed declines in indexes without the ability to take defensive positions. This is because Tracker Funds become representative of the overall index or market performance and so, if the whole index suffers a decline, then so do they and they cannot act to rectify this by only matching the well-performing stocks within a particular index.

A short few years ago I had a pretty bad credit score. Fortunately for me, I couldn’t qualify to buy a house. If I could have, I probably would have and that would have been a huge mistake. Over the life of the loan, it would have cost thousands and thousands of dollars to get a loan with a higher interest rate.

Lately I’ve been doing a lot of calculations related to mortgage loans. In particular, I have figured out how much it would have cost to get my current mortgage loan if I had a credit score that’s lower than my current score. As it turns out, it would have cost me a ton.

With my current mortgage loan, I borrowed just short of $190,000 and over the course of 30 years, I will end up paying over $135,000 in interest. But, I have a great interest rate. In fact, my interest rate is probably a full two percentage points better than I could have had a few years ago when I had bad credit. At an interest rate that’s 2% higher than my current one, I would end up paying $218,00 in interest over the life of the loan. I’m no financial expert but I do know that I can’t afford to be paying $80,000 in extra interest in my lifetime, no matter how long the term that it’s divided over.

Realistically, I would end up paying at least 1.5% extra in interest if I had a 650 credit score. Calculating the cost of that interest rate over 30 years would have cost me $196,000 in interest – too much for my budget.

Fortunately I learned how to improve my credit. I committed to paying my credit cards completely off and did. Since the first month when I got them paid completely off, I have been paying them off in full. I haven’t carried a balance since. I also haven’t made a late payment in seven years. My credit score has responded nicely and I now have a great credit score – a full 50 points above what I need to be considered as an “A” candidate.