The red flag: Guaranteed very high returns!

If it sounds too good to be true, it is!  No proper investment manager will claim to give you above-average returns of the same size, year in, year out, regardless of market movements. 

The truth is that the average investor should be very satisfied with returns of 6% a year (which is considered good!). An exceptional fund manager (which is rare no matter where you go) can achieve higher returns depending on market conditions. Even a man like Warren Buffett, the world’s richest investor, has had average returns of 12.% per year in recent times*. So if someone comes up to you offering 30% in a year, or even 3% in a month, turn around and walk away!

*Source: https://www.forbes.com/sites/randybrown/2019/05/02/warren-buffetts-legacy-at-berkshire-hathaway-is-under-pressure/#cda527e7b1f7

Common investment scams in Malaysia to look out for:

• Macau scam

• • You are offered amazing opportunities to invest in stocks over the phone
  • You are guaranteed great returns in short periods
  • Read more here: https://www.thestar.com.my/news/nation/2018/09/28/99-arrested-in-macau-scam-bust-largest-made-so-far

• Money games or investment pyramid schemes (Malaysian equivalent of a Ponzi scheme). A Ponzi scheme is a type of scam where money from newer investors is used to pay high returns to earlier investors as a way to demonstrate or show success and to attract even more investors into it. However, since the returns paid are not coming from real investments, eventually the scheme will end in disaster.

• • Pretends to be a legitimate investment opportunity (persuasive staff, uses technical terms)
  • Offers to pay you to recruit others into the investment
  • Read more: https://www.freemalaysiatoday.com/category/leisure/2019/04/15/beware-money-games-if-its-too-good-to-be-true-it-isnt/

Make sure an investment product is licensed by Bank Negara and the Securities Commission. You can call the Securities Commission hotline at +603-6204 8000 or Bank Negara’s hotline at 1-300-88-5465 to check or report suspicious investment activities. 

You may have heard of Bernie Madoff. He ran one of the biggest Ponzi schemes in history, with $50 billion in losses estimated. But did you also know that Bernie was once the Chairman of the NASDAQ (an American stock exchange)? It’s this level of credibility that he exploited to cheat his victims.

*Sources: 

https://www.forbes.com/sites/randybrown/2019/05/02/warren-buffetts-legacy-at-berkshire-hathaway-is-under-pressure/#cda527e7b1f7

https://www.maybank2u.com.my/maybank2u/malaysia/en/personal/loans/personal/personal_loan.page?

https://ringgitplus.com/en/credit-card/