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Why 100% return in 1 year is risky? 
(Tue, 25 Sep Pre-Open) 
 
Greed is an emotion that a human beings can hardly control. The very thought of having all the worldly pleasures within a short span of time makes us irrational in our decision making. Imagine an assurance to double your capital within 1-2 years. Isn't it tempting? Most of us would get carried away by such an offer. That's because our greed overtakes sanity here.

Taking the advantage of this emotional weakness many ponzi schemes have duped millions of investors in India. Take the recent example of Gold Sukh India Pvt Ltd. It is believed that five directors of this company have duped almost one lakh people in India. They mobilized approximately Rs 2 bn and suddenly disappeared. And this is not a one off case. There are many such ponzi schemes operating in the market which have fooled many investors.

These companies know their business well. They have attractive names and hire smart marketing agents. The returns on offer are also irresistible. They offer joining gifts to the members. Also, to fake trust they make initial payments on time. However, once they have amassed enough corpus they disappear like smoke. By the time investors realize anything it gets too late.

However, we feel that the investors can protect themselves from such dubious companies by just being alert and not greedy. Any scheme that offers to multiply your return in a very short span of time should raise eyebrows. Also, remember that returns are never guaranteed in investments. Thus, schemes that offer assured return guarantees should be viewed with suspicion. We know that price of any asset, be it gold, stock, bonds, real estate or commodities is not predictable. Then how can the subject company offer you a return guarantee? Such guarantees are offered just to lure investors.

Also, such companies try to avoid paper work in their transactions so that they can't be traced afterwards. They will prefer cash transactions and will work on word of mouth.

Thus, investors should be very careful in selecting their investment consultant. One should not get lured away by returns alone. Basically it's a recipe for disaster. They should gauge the historical track record and asset allocation of their investment schemes. If one is inept, seek professional advice.

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2 Responses to "Why 100% return in 1 year is risky?"

ashim

Sep 25, 2012

Many of these schemes are indirectly encouraged by politicians. Respective state governments allow these schemes to flourish. The promoters of such schemes also organise seminars and award-giving ceremonies blessed with the presence of local political leaders as chief-guests to give away the awards. Thus, the common man is duped into trusting these schemes.

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RAVINDRAN

Sep 25, 2012

I fully agree with your comments. Greed is an inresistable phenomenon of human being. Everybody wants to become rich within a short span of time, without knowing the fact. The amount invested in such companies may not be their hard earned money. No person can invest their hard earned money. There are people making investment to make their black money to white money. They are not bothered about loosing money. Interestingly, public are not learning even after becoming a victim of such investment.

Ravindran

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