scams and dubious investments

[Sporkin]

Just saw an article on EcoHouse:
http://www.channelnewsasia.com/news/sin ... 13584.html

I was wondering what if anyone of you have encountered any dubious investments or outright scams? I was involved a few years ago in some wine investment which didn't pan out, some people suspected it to be a ponzi like scheme, but it was difficult to prove and even if proven i suspect claw back would be nigh impossible. Long story short, cut my losses, refused to throw good money after bad and took it as a lesson.

A few years after that I have heard about other "alternative investments" (air-quote totally deserved) like timber, gold certificates and land banking, much of which turned out to be fraudulent as well.

What dubious schemes have you encountered?

[PNGMK]

The sideways approach is the best way to answer this.

What are good investments (as in income or capital growth investments with long term stability)?

1. property in growth locations with strong commitements to title security. Preferably income returning (rented out).
2. Shares in listed companies with dividend growth, asset backing, low debt and reputable management.
3. Bonds when returns are high
4. Private Equity in companies that have good returns and which are you are fully cognizant of the books. - difficult to get into.
4A. Ownership (i.e. equity) of income returning (i.e. royalty paying) scores, books, film rights etc... also a closed shop.
5. CPF and some other pension funds
6. Perhaps mutual funds... highly subjective call that one (past performance not being an indicator of future performance).

Not much ... so that leaves EVERYTHING you're offered that doesn't fit in the above .... to be a bad investment. Now there are bad bad bad investments (off the plan condos in Malaysia or the Gold Coast), bad bad investments (unit trusts, tax saving schemes), bad investments (forex trading, day trading which are not investments but jobs with your own capital at risk) and investments which have no income (commodities such as gold).

Do you understand? YOU decide what are good investments and what fits your profile, anything else that comes along... ignore.

[Sporkin]

Good view on the subject at hand. Thanks for the overview, I'm out of my depth in such matters and only recently starting to get my feet wet looking at wealth preservation and creation...so much to learn.

Another way to judge the validity of an offering I suppose is the old adage of "If it sounds too good to be true, it probably is."

The sideways approach is the best way to answer this.

What are good investments (as in income or capital growth investments with long term stability)?

1. property in growth locations with strong commitements to title security. Preferably income returning (rented out).
2. Shares in listed companies with dividend growth, asset backing, low debt and reputable management.
3. Bonds when returns are high
4. Private Equity in companies that have good returns and which are you are fully cognizant of the books. - difficult to get into.
4A. Ownership (i.e. equity) of income returning (i.e. royalty paying) scores, books, film rights etc... also a closed shop.
5. CPF and some other pension funds
6. Perhaps mutual funds... highly subjective call that one (past performance not being an indicator of future performance).

Not much ... so that leaves EVERYTHING you're offered that doesn't fit in the above .... to be a bad investment. Now there are bad bad bad investments (off the plan condos in Malaysia or the Gold Coast), bad bad investments (unit trusts, tax saving schemes), bad investments (forex trading, day trading which are not investments but jobs with your own capital at risk) and investments which have no income (commodities such as gold).

Do you understand? YOU decide what are good investments and what fits your profile, anything else that comes along... ignore.

[PNGMK]

NEVER be rushed into an investment. "A fool and his money are soon parted".

[JR8]

Another way to judge the validity of an offering I suppose is the old adage of "If it sounds too good to be true, it probably is."

Yep indeed, and PNG gives a good summation.

You can forget most things where there are paid salesmen who approach you to buy a product. The most rewarding markets/assets/investments take a huge amount of your own research and time to figure out, perhaps precisely because you're cutting out intermediaries.

There's always a lot of lazy/greedy money looking for instant-profits-nirvana;.... cue scammers.


p.s. Remember, risk and reward are inversely proportional. So if the promised reward is good to very good, you can bet your life it's high risk. If you are being sold such a thing by a guy on commission, you can bet that the high-risk nature will be ignored or down-played.

[JR8]

What dubious schemes have you encountered?

In retrospect (and as an ex-private banker ) just about every and any scheme that I have not created and self-managed for my own purposes.

Packaged financial products exist for lazy people.
Lazy people are willing to pay fees.
Lazy people hence get (post-fee) lower returns.
Such laziness is like a compounded mega-tax on your potential returns/pension.

[JR8]

Good view on the subject at hand. Thanks for the overview, I'm out of my depth in such matters and only recently starting to get my feet wet looking at wealth preservation and creation...so much to learn.

That you know and accept that is probably one of the more valuable assets you have Most of us have no idea what will happen tomorrow. In financial terms, one can accept it as 'Strategic Ignorance'; which entails letting statistical models speak for themselves.... i.e. letting investments select themselves based upon some core criteria.

I invest directly in stocks. My core criteria are:
- Is in the FTSE-100 (though I'll look at the very top end of the FTSE-250 too)
- Dividend, reliable and growing for 3+ years
- Div Yield over 5%
- The div paid is covered by earnings by 130%+
- er and one or two other hurdles that I forget now, as I have an excel spreadsheet that does it for me, and it's 'invest and forget', so you don't have to think or keep abreast of it years later...

I've linked it before, the road to financial self-help, self-knowledge/reliance.
www.fool.co.uk [UK site]
www.fool.com [US site]
There are others IIRC, maybe an Aus one too... but the core principles will translate to any index.

No link/connection, I just came to accept that a lot of their financial philosophy is true, sound and wise... the long-term fee-free saver-tortoise really does get a hundred victory laps over the short-term fee-paying hare ...

[Sporkin]

Its quite overwhelming as I come from a non-financial background, it feels like going back to school all over again. Especially since I'm mainly trying to piece things together from google and not following a fixed curriculum where the concepts are introduced and linked in a related manner, there is significant overhead in having to look up references back and forth when trying to understand an article.

There is also the annoying thought that some articles are written with an agenda in mind, perhaps to influence the market. Knowing what to believe is tricky too!


Thanks for sharing your thoughts and the links.

Good view on the subject at hand. Thanks for the overview, I'm out of my depth in such matters and only recently starting to get my feet wet looking at wealth preservation and creation...so much to learn.

That you know and accept that is probably one of the more valuable assets you have Most of us have no idea what will happen tomorrow. In financial terms, one can accept it as 'Strategic Ignorance'; which entails letting statistical models speak for themselves.... i.e. letting investments select themselves based upon some core criteria.

I invest directly in stocks. My core criteria are:
- Is in the FTSE-100 (though I'll look at the very top end of the FTSE-250 too)
- Dividend, reliable and growing for 3+ years
- Div Yield over 5%
- The div paid is covered by earnings by 130%+
- er and one or two other hurdles that I forget now, as I have an excel spreadsheet that does it for me, and it's 'invest and forget', so you don't have to think or keep abreast of it years later...

I've linked it before, the road to financial self-help, self-knowledge/reliance.
www.fool.co.uk [UK site]
www.fool.com [US site]
There are others IIRC, maybe an Aus one too... but the core principles will translate to any index.

No link/connection, I just came to accept that a lot of their financial philosophy is true, sound and wise... the long-term fee-free saver-tortoise really does get a hundred victory laps over the short-term fee-paying hare ...

[JR8]

Find yourself 20-odd such (diversified) stocks. The younger you start the better due to compounding. Invest £x a month, year in year out, and forget. There's a better pension than you'll get just about anywhere else... and it's not some CPF or annuity that you can't touch.

---

This sums it up well...

http://web.archive.org/web/201310081533 ... doris.aspx

[brian_singapore]

The sideways approach is the best way to answer this.

6. Perhaps mutual funds... highly subjective call that one (past performance not being an indicator of future performance).

bad investments (forex trading, day trading which are not investments but jobs with your own capital at risk) and investments which have no income (commodities such as gold).

I would add any part of the actively managed investment industry - any-time an investment relies an a commissioned sales person your headed for trouble.

[PNGMK]

The sideways approach is the best way to answer this.

6. Perhaps mutual funds... highly subjective call that one (past performance not being an indicator of future performance).

bad investments (forex trading, day trading which are not investments but jobs with your own capital at risk) and investments which have no income (commodities such as gold).

I would add any part of the actively managed investment industry - any-time an investment relies an a commissioned sales person your headed for trouble.

Yes... bad bad bad.