Inspired by the flurry of questions on this site about the returns available from investing in equities over the long term, I decided to approach my UK bank about setting up a small investment fund, built up by a modest monthly contribution of £50.
I am naturally quite risk-averse when it comes to money, but I can afford to gamble with that kind of sum. Besides, on investigation, it is clear that over the long run, these funds do offer fairly impressive gains. The high-risk option offered by my bank, for example, has gained 42% over three years.
After meeting with the bank, however, I was essentially told that they would refuse to invest in a high-risk fund for a first-time investor. This is in spite of the fact that I'm happy to risk the sum involved and happy to leave it over the long term where trends suggest it is almost certain to do better than inflation.
The fund they suggested has a much more modest 16% return rate over three years. If anyone wonders, I'm only quoting three-year returns because that's how long these products have existed, so further data does not exist - the same bank shows good five-year returns on other products, and I was intending to invest over ten.
Of course, as the customer and I could insist on getting what I want or I could take my business elsewhere. But it gave me pause for thought because I couldn't understand why - and the person I spoke to couldn't give me a good explanation besides "experience" and "policy".
I wondered if it might be because I have limited liquid assets - instead, my cash is sunk into a property which I fully own and which yields rental income. That's where I sunk all my savings because in case of dire emergency I have always felt I could simply borrow against it and then seek to sell to repay the debt.
Presuming that logic is sound, why am I being advised to steer away from more fruitful investments for a sum I can afford to lose?