There’s an old story that makes me chuckle each time I tell it:
Once there were two men who formed a partnership. They built a small shed beside a busy road. They obtained a truck and drove it to a farmer’s field, where they purchased a truckload of melons for a dollar a melon. They drove the loaded truck to their shed by the road, where they sold their melons for a dollar a melon. They drove back to the farmer’s field and bought another truckload of melons for a dollar a melon. Transporting them to the roadside, they again sold them for a dollar a melon. As they drove back toward the farmer’s field to get another load, one partner said to the other, “We’re not making much money on this business, are we?” “No, we’re not,” his partner replied. “Do you think we need a bigger truck?”
My mantra has always been “invest smart.” That refers not only to what kind of investing you do, but who you invest with. When investing in a fund, you are delegating the day-to-day decisions to the fund manager. If the fund manager is lacking at all in competence or character, the investment is clearly not smart. Investing in trust deeds can be done in a responsible, low-risk manner, provided you have evaluated your fund manager and trust that he is savvy and honest enough to not obtain and sell dollar melons for a dollar.