The Weekly Advertiser

FINANCE: Be wary – it’s too good to be true

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Just as financial products and systems are becoming more complex, so are the scams that are being inflicted upon the investing public.
The financial scams being promoted, especially over the internet, have become as sophisticated as the clients they are attempting to woo.
The word ‘Ponzi’ has been splashed across newspaper headlines in recent years, but what does that term really mean?
What is a Ponzi scheme?
Ponzi schemes are named after Charles Ponzi, a prominent fraudster who used this technique to fleece his victims in the United States of America early last century.
These are scams in which the capital invested by new investors goes to pay income to earlier investors – so new investors are always needed to keep the scheme going.
This is a very dangerous strategy and one that is doomed to eventually fail and take with it ‘investors’.
How to spot a Ponzi scheme
Identifying a Ponzi scheme versus a legitimately sound investment opportunity is not always easy, but the common theme is that the opportunity just seems too good to be true.
Here are some points to note:
• It’s a secret: A genuine investment promoter will be licensed with the Australian Securities and Investments Commission, ASIC, and will be happy to provide you with fund data that can be verified.
Be suspicious if promoters are overly secretive in their dealings with you or use diversionary tactics to avoid providing information such as audited financial statements.
• Lack of transparency about how returns are generated: Make sure you really understand the investment and how it grows.
Ask as many questions as you need to. Do not be tempted to invest in anything you do not fully understand.
And, if the answers are not forthcoming, walk away.
• Emotive language: This is often used to trick investors into parting with their cash.
Be careful of advertising that promises a ‘high-yield investment opportunity’ or states that the investment uses ‘top-secret’ investment techniques allegedly unknown to the wider financial community.
Just be careful
Talk to your financial adviser before making any investment, especially if it seems too good to be true.
Useful information about scams can also be obtained from the ASIC consumer website at www.moneysmart.gov.au.

The entire January 23, 2019 edition of The Weekly Advertiser is available online. READ IT HERE!

Short URL: http://www.theweeklyadvertiser.com.au/?p=72630

Posted on Jan 23 2019

Posted by on Jan 23 2019. Filed under Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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