17th June 2009

Dear Investor,

Use your nose before buying a financial product

In the current investment environment, it is always good to step back and look at some fundamental rules of investing. Marcus Padley is a stockbroker with Patersons Securities and is the author of the daily stock market newsletter Marcus Today. He also writes for major newspapers in Australia. In a recent article, he listed 12 tips when looking at buying a financial product, which we would like to share with you. Here they are:

  1. Don't expect the law to protect you - no one can protect you from your own stupidity in your own living room.
  2. Take responsibility yourself. Have your wits about you. Common sense will suffice. You are your only defence.
  3. Most dodgy products are flashing warning signs. If the salesperson has travelled 100km to see you at 8.30 at night then something is wrong.
  4. Remember the golden rule. If it's too good, you would not be offered it. If you get offered it, you don't want it.
  5. If you don't understand it, don't buy it. Complexity is camouflage.
  6. Don't put too much money in one product.
  7. Be very careful about borrowing to invest. There are not many (any) asset classes that will reliably return you more than the cost of borrowing. There aren't many that will return it without a risk.
  8. If you are buying a dressed-up product, you are almost certainly paying more than market interest rates.
  9. Reward is always balanced by risk. You will be told about the rewards. If you can't see the risks, you clearly don't understand what you're investing in.
  10. Don't be rushed. There are a million financial products out there. You don't "need" to buy this particular one in a hurry.
  11. Anyone selling you a return of greater than 9.5% a year either has her fingers crossed behind her back, is lying, or is selling you a greater-than-average risk product.
  12. Anyone earning a commission of more than 2% is selling something hard to sell, so you probably shouldn't buy.

We at La Trobe agree with these thoughts. That's why we like to keep things simple and straightforward. We only manage mortgages, and we've been doing that for over 50 years. We believe that our Mortgage Fund offers value for money, with an appropriate reward for the investment risks involved. We offer our investors a choice of mortgage-related investment options, which invest in a selection of mortgages underwritten and managed by La Trobe. The mortgages are diversified by location, sector, interest rate and maturity profile. Investment returns range from the Cash & Mortgages Option, currently paying 5.25% p.a. variable and the Pooled Mortgages Option, currently paying 6.95% p.a. variable, through to the Select Mortgages Option (7.15%+ p.a.) and the Special Situations Option (15%+ p.a.), which allow investors to select the mortgages in which they want to invest. These second two options pay a higher return, but they are riskier investments, particularly because they don't offer the diversification benefits of the first two options.

When you read our Product Disclosure Statement, you will see that we set out the risks of an investment in our Mortgage Fund, as well as the returns, so that you can make an informed investment decision.

We don't pay any commission on investments in the Cash & Mortgages Option, and only 0.50% commission on investments in the Pooled Mortgages Option. Commissions paid in relation to the other two options vary, but are always well below 2%.

And in particular we agree with Marcus when he says "Don't be rushed". Take your time when making investment decisions, and make sure that you can sleep at night once you have invested your money.

Best regards,
Chris Andrews


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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

* La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
(1) The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
(2) Withdrawal rights are subject to liquidity and may be delayed or suspended.
(3) As at 30/11/10 the La Trobe Australian Mortgage Fund had received a Morningstar RatingTM of 5 stars. The Morningstar Rating is an assessment of a fund's past performance - based on both return and risk - which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant product disclosure statement, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf
(4) 3.75 star rating out of a possible 5 star rating indicates that Adviser Edge believes that La Trobe has performed in line with its peers and exceeded its peers on some fronts.
(5) The Standard and Poors rating of 4 out of 5 stars indicates that S + P has high conviction that La Trobe Financial will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers.
(6) The award was given to the La Trobe Australian Mortgage Fund, Pooled Mortgages Option.
Research Ratings are subject to change. To view the latest research information please visit www.adviseredge.com.au or www.standardandpoors.com.au. Ratings issued by Adviser Edge Investment Research AFS Licence No. 236783 and Standard & Poors Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. The ratings are only one factor to be taken into account in deciding to invest. Research Houses receive a fee from La Trobe for rating the product. The Adviser Edge rating is generally a measure of the rated entity's capacity to meet its repayment obligations in all market circumstances.
IMPORTANT: This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website.