The first principle of investing is to never forget that it’s your money that is being invested. Therefore it is important that, prior to making any investment decision, you ensure that you understand what you are investing in, its risks and rewards and that these fit to your needs, time frame and appetite for risk.
This is particularly true in the aftermath of the recent Global Financial Crisis, which revealed with disturbing frequency poorly understood or managed investment products. It is now more important than ever to understand the choices available to you as an investor and to seek clarity prior to investing so that your decisions are informed.
There are some basic rules to investing that should always be at the forefront of an Investors mind. One of these is to ensure you have an appropriate strategy that is designed to achieve your goals, that considers risk - both underlying investment risk as well as asset allocation and volatility - and provides effective diversification. With diversification, the spreading of your investments over a range of distinct categories ensures that no single investment puts at risk the majority of your investment portfolio. The old adage of not putting all your eggs in the one basket, which some may consider trite, should not be forgotten.
In considering an investment in the Balmain Discrete Mortgage Income Trusts (Trust), and in particular when considering investing in Loan Units in the underlying individual Sub-Trusts, Investors should never forget that when considering the Trust, no Investor should invest a substantial proportion of their assets in a single Loan Unit. Diversification can be better achieved by investing across a number of Loan Units all of which meet your risk reward and term appetite. It also follows that no investor should place a substantial proportion of their investment portfolio in the Trust or indeed any investment to ensure that the benefits of diversification are not overlooked for return.