Many are tempted by the allure of quick cash, desiring for the gain without the pain. In this world of hard knocks, we know that nothing comes free. This easy path to riches normally ends up with the “investor” getting burnt, very badly.
What do these “investments” include?
Popular schemes in the region ranged from the “investment” in precious metal (Gold and silver), plots of land to even “lifestyle packages”. These “investment” schemes often offer exceptionally high rates of return with “promises” of breaking even within a year! To put things in perspective, the S&P 500 (INDEXSP:.INX) returned a CAGR of close to 9% per annum over the past century. Recouping your initial investment within a year (100% CAGR per annum) was equivalent to a CAGR of 6% per month!
Some Scams In The Region!
One of Singapore’s largest Ponzi scheme dealt in the business of “lifestyle packages”. These “lifestyle packages” were allegedly used to invest in their “vast business empire” which included operations in the entertainment, energy, marketing and even finance industry! Or so we thought.
Generally a Ponzi scheme involves the promise of a high rate of return. It pays out regular “dividend” by using funds provided by new “investors” and not from business profits. Basically one uses the new funds to pay the existing “investors”. The music would eventually stop. And it did with the two perpetrators found guilty of perpetuating fraud, criminal breach of trust and falsifying account.
From a Sunday Times Article dated Aug 3, 2014, Genneva was a gold buyback scheme that went wrong with more than 10,000 “investors” caught with their pants down after they were raided by the Commercial Affairs Department (CAD) and went bust in 2012.
After the global financial crisis of 2008, the group’s land-based investment products suffered losses. To ease cash flow problems, the directors hatched a plan to get clients to “invest” in the Boron scheme, which involved financing the sale of a fuel additive. This Boron Scheme offered 12.5% return within a maximum period of six months!
Signs If It Could Be A Scam!
- If it sounds too good to be true, it probably is!
- Watch out if there’s a guaranteed return, especially a high rate of return!
- Collectively managed schemes also tend to be of concern
- A definite red flag would be when that said entity was listed on the Monetary Authority of Singapore’s Investor Alert List.
Value In Action
For some cases, justice may have been served but even so, most of those “investors” might never see their hard earned money back again. No matter what we invest in, we always have to do our due diligence; it’s all about doing your research!
To find out more tips to identify common unregulated schemes, you can check out MoneySense, a national financial literacy programme for Singapore. The Asia Report also has a great article that touched on this subject titled, “The Biggest Lesson I Learnt From Jim Rogers Workshop“.
There isn’t a shortcut to riches. As the saying goes, “Shortcuts cut life short”!
Join us on Facebook for more exciting updates and discussion about value investing. Submit your email address for important market updates and FREE case studies!
We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguarded.The information provided is for general information purposes only and is not intended to be any investment or financial advice.
All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.