Many people are paying a very heavy price right now for being lured by all sorts of financial advisors for a supposedly sure and risk-free return of a few percent a year. As it now turns out, that was nowhere near the true level of risk that these clients were taking, because they were actually investing in a more than uncertain business, which has now been confirmed.
Who did you give the money to?
After several months of struggles, the Premiot Group effectively went bankrupt, and with it the hopes of several thousand Czechs, who often invested a large part or even all of their savings in the bonds of this company. This is another example of a dusty corporate bond, which unfortunately the domestic market is literally flooded with.
The sellers of these bonds, often rewarded with a considerable percentage of the stated nominal value, use, or rather abuse, insufficient financial literacy, which unfortunately still prevails in the Czech Republic. It is protected by the prospectus of the Czech National Bank, which, however, is a mere formality that must be fulfilled and no one verifies the plausibility of the project or perhaps its riskiness within it.
It is this and other stamps that many are tempted by. In the case of Premiot, they should have lent their money to an apparently very solvent company that was dedicated to the construction of development projects in the country and in other countries. Articles with its founder appeared in Forbes magazine, and the company was patronized by a number of celebrities, such as Petra Kvitová.
Foto: Shutterstock
Is it really worth it?
And then it is necessary to realize at what time these bonds were subscribed. This was back in the days of very low interest rates, when banks offered virtually no appreciation and people still wanted to let their money earn money. These bonds seemed to be a great choice for them because they offered interest of around eight percent per year.
But what is this valid when the bond issuer has essentially stopped paying interest after the first year and it has also been found that the principal of the bonds is uncollectible. It is now clear that this is not going to end well, and if the bondholders get anything at all, it will be at most a few percent of the amount they put into the thing. And that’s a really nice review, don’t you think?
Finally, people should realize that a bond is a very risky product that guarantees nothing at all. You are simply lending money to a company that can do with it as it sees fit. And if it is a company with a history of a few years, you should think about whether it is really worth it for the few percentages promised per year.
Foto: Shutterstock
2023-09-09 14:00:00
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