Greed drives Scams

There once was a farmer who wanted to raise a turkey so he built a pen with a nice bed of straw, fresh water daily and plenty of food. He put a baby turkey in the pen and each day checked on the bird, changed its water, and filled its food bowl. The turkey loved his little place and the bigger and fatter he got, the more he bragged to the other farm animals about his wonderful life.
 
One day the farmer came to the pen to visit his turkey but this time rather than carrying a handful of feed, all he had in his hand was a sharp axe. The moral of the story is, “Past performance is no guarantee of future results.”
 
I receive regular investor fraud notices and today I read once again of a Ponzi scheme that cost retirees millions of their hard earned dollars. I commented to someone in my office about how this type of fraud has gone on for decades. I asked out loud when people will finally stop sending money to these criminals, to which someone in the office replied, “When we eradicate greed.”
 
Despite all the warnings, Ponzi schemes continue to succeed because of their brilliant marketing plan. All they require is for the scammer to get a few people to give him money, for which he almost immediately begins to send them a very high rate of return. In no time at all his investors will begin bragging to their friends and neighbors about their wonderful investment. Ignoring all red flags, others rush in to invest because they don’t want to miss out on the big profits that everyone else seems to be making. Common sense goes out the window when greed steps in to take its place. This genius marketing plan costs almost nothing to implement. Before long the scammer is syphoning off huge amounts of money, unbeknownst to the happy investors upon whom the axe will soon fall.
 
As long as there is a market for greed, criminals will continue to profit from it. If you want to avoid such schemes, begin by recognizing that an unreasonable rate of return is a huge red flag, regardless of how long a friend of yours says they have been receiving it. One of the first signs of fraud is the use of testimonials from other “satisfied” investors who themselves have been duped into being unwilling accomplices. They might be very excited about the investment because the payments keep coming into their bank accounts each month, unaware that the scammer is merely giving them other investors money, which will eventually run out.
 
Past performance can be valuable in evaluating an investment but it is only one of many factors to consider. Never use it alone as evidence of a good investment, or you may one day wind up like that happy turkey looking at the wrong end of a sharp axe.