Quick-returns, Money-doubling Schemes: A Wise Investor's Response

Our web site is replete with articles and resources that encourage you to investment and, in fact, eulogise the concept of investing, that process of ploughing part of your saved income into financial assets that are expected to grow in value over time. So, when there is a scheme that promises rapid returns that can even steadily double your capital each month, we should be happy, right? Wrong. We preach investment, but only in sensible, established, well-understood investment outlets, assuring reasonable returns but more importantly, historically known to be safe enough to secure your investment capital. Get-rich-quick schemes? Count us out.

You've Got to be Wise
Now, you will think this is an unnecessarily point, since every investor is expected to have enough wisdom to value his savings as not to dump them into schemes that can hardly be understood, just because they offer mouth-watering returns? You will be wrong again, because such schemes are thriving. People want to grow wealth (perfectly in order), but they can't wait for the results (suicidal). So, they jump into the esoteric schemes, which, by design anyway, will first work for some people. The danger is that the initial success of some entrants is usually designed to draw in more participation (after all there is proof in Peter, Musa and Esther). But like most pyramid schemes, some large number will bear the brunt somewhere down the road, when the pack collapses. If you think somebody has to stop you from ruining the future you want to build, what are you up to? Any way, we are begging you to be wise. The securities and Exchange Commission has also taken steps to list, on their web site, some of the schemes they have information on. The many others not included there don't also qualify to dispossess you of the money you have struggled to save. There are reasonably rewarding, yet transparent, regulated and relatively safe investments outlets for your savings. Why throw it to the dogs?

Beating Fraudulent Investment Schemes
Those who churn out investment schemes and programmes that are purely designed to fleece investors of their hard-earned savings are not likely to run out of steam in a hurry or lose the creativity to package offers that can send the greedy salivating and rushing to empty his bank account. In effect, it's difficult to pin down exactly how a fraudulent scheme will be structured. Yet, if you observe certain principles of prudent investing, you will hardly fall prey. Use this check-list to reinforce the common-sense that is expected of a wise, smart investor:

• Watch Out for Jumbo Returns
  The saying, "if it sounds too good to be true, it probably is" should ring clearly in your memory. Jumbo returns are a common feature of fraud schemes because they need to be that mouth-watering to excite greed in you and weaken your guard. But that should be your first trigger: any promise of returns or reward that is extraordinary should be a pointer to the need for caution and extra enquiry. Most times such offer is phoney. You need to make money, but as we keep stressing, it isn't an overnight thing. Programme your investment plan, follow it consistently and give it some bit of time to blossom. Short-term speculative investment? An easy route to the Poorhouse.
• Vague Claims
  The offer that has a lot of superlative claims that are more vague than specific and cannot be easily pinned down, needs to be watched. 'Dominant market player' with a chain of 'very successful products': which player is that and what products are we referring to? What is the exact nature of the business of the scheme manager - where are they putting your money that earns the kind of returns expected? What are you receiving for your investment. A lot of seemingly convincing phrases which, when examined, will really be empty because they say nothing concrete, should arouse your suspicion.
• Double-check and Cross Check
  In any case, you need to research propositions that you have any interest in considering, unless you don't care what happens to your money. Cross check the claims: the company, its office, the claims in their offer, etc. Ask all the questions you can and don't be intimidated into thinking you will offend somebody if you do and possibly lose the opportunity to profit big. If that happens, it's another danger-sign. You can't be stampeded too. Undue pressure on you to act quickly may suggest some trouble. Be careful!
• Deal With Licensed Operators
  Every important sector of the economy is regulated by a government agency. For investments, that is largely the Securities and Exchange Commission which licenses market operators of various categories. No serious, honest operator, of whatever type, will like to proceed in business without seeking appropriate registration to operate freely under the law. If the managers of a scheme you are getting interested in haven't had the courage to face SEC and secure a license for their business - which clearly makes it a clandestine operation - should you be that impetuous to rush your money to them? Can't you see a problem? You can always check with SEC about a particular operator. In fact, approved operators are listed online on their web site. Besides, for licensed operators, you will be able to find those who have various disciplinary issues and poor track record, through SEC. Isn't it better to distance yourself from such operators with questionable integrity?
• How Marketable?
  If you buy stocks or other legitimate investment assets, there is a ready resale market. You can trade your asset for cash, should you need to. Where do you transact such transfer for the investment scheme you are being offered. If there isn't, the illiquidity alone is enough risk. You're better off, probably, putting your money in other good investments.
• Ask Your Stockbroker or Other Adviser
  There is the tendency to compel you not to disclose a 'deal' to other people, but that too is a red sign. Even if that is not the case, it's always good to have people you bounce off new ideas with, say your stockbroker. Ask if they know about this scheme, at least. That may save you from trouble.
• Pay by Cheque
  Not foolproof, since fraudsters open fraudulent bank accounts to process cheques, but don't pay for investments in cash. Always issue a cheque and in the name of the company, not an individual officer, say a marketer that approached you. Company reps also divert funds collected from investors, even if their company is legitimate.

When a Victim
If the harm is already done, one good thing you can do is to report to appropriate authorities. Telling SEC, for instance, may help save other prospective investors, as they are likely to move in and forestall further deceit of the investing public. Read this related article on dealing with abuses by your stockbroker.

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