Financial Self ProtectionA client called about three weeks ago. She had received an e-mail from a company offering guaranteed investment returns offshore. No risks. "Is it a good deal?" she asked. The principle of guaranteed, risk free profits I understand. There are a few companies that offer such things and they are usually more like businesses than investment funds. What stands out about this request though was the GUARANTEED return. The company in question was offering 3% per month! With no risk of capital loss. Wow! I want some of that! The world's second richest man and most successful investor, Warren Buffett, reckons that if you can grow your money by at least 15% compounded (after tax and inflation) each year, you will soon be worth millions. You get that return and time will do the rest. The trick is to get that return consistently (hence the reason he is so wealthy and everyone else is not). What do you think? Would you take up the offer and get your chequebook out? I advised our hero to keep hold of her money (I hope she has) as the return was just too juicy to be true. With bank rates so low across the western world, three percent per month is just too much. In life, there is rarely, if ever, a free lunch. To put it in perspective, if I had found a way to produce 36% each year risk free by investment alone, do you think I would share it? Hell no! I'd borrow every cent I could from everyone and every bank I had ever met and put the lot in myself. Repay the loans a year later and keep investing my enormous profits. Soon enough I would be retired. So why would anyone do this for YOU? Someone they don't know and have contacted by e-mail. Keep your wits about you. If it looks too good to be true, I am sure it is. Learn to practice some financial self protection. * This was published in March 2004 * To read more about financial scams and frauds, please also visit:
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