How do you know it is a ponzi scheme?

17 Sep

Author: Maya Fisher-French

Publications:  mayaonmoney.co.za

Date Publiched: 17 September 2012

The recent Western Cape Relative Value Arbitrage Fund (RAVF) scandal that led to suicide shooting of Julian Williams by his associate, Herman Pretorius, is estimated to have lost investors around R1.8 billion. While investors, and financial advisers who recommended the fund, throw up their hands and say “how could we have known”, the simple investment rule is that when returns promised are too good to be true – they usually are.

“If the product sounds too good to be true, it usually is. One common characteristic of a scam is guaranteed high returns for example guaranteeing 30% per cent returns, this should ring an alarm as it is not realistic,” says Paul Roelfse from the Financial Planning Institute (FPI).

When an investment promises any return above cash, the first question you need to ask is: what is it ……

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