Recent scandal ridden downfall
Too Good to Be True Isn’t Necessarily So
By John Dade
With the recent scandal ridden downfall of yet another Wall Street Big Dog Bernard Madoff, the usual group of "see we told you so" folks are happily falling all over themselves rushing to get the word out to all of us hapless investors that their timeless mantra of "if it sound too good to be true it probably is" has proven itself again.
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Rather than looking more closely at the reason for the investment going sour and even more so, the reason so many supposedly smart and big money investors became involved with Madoff and others like him, these journalists and financial pundits lazily just fell back on that always at the ready, time worn "too good" cliche.
When one takes a step back it becomes more clear, at least in my opinion, that those who invested with Madoff and other schemes like his ignored all or most of the basics of Investing 101. Instead, these investors poured in millions, and in some cases billions of dollars based on what I believe were the wrong reasons…the trappings of celebrity, exclusivity, word of mouth and the most telling…a guaranteed return. Yet guess they can’t be totally to blame. After all we as a nation are prone to believe and venerate celebrity. It’s is easier for us to just "believe", than to do the hard thing like homework and due diligence. Not that homework and due diligence will now or in the future "guarantee" no investment losses, but in the case of Madoff and other similar scams enough red flags would have appeared to give the investor a clear heads up that something didn’t seem right. In which case the investor could have passed on the deal or reduced the amount invested and subject to loss. This is a textbook case where investing, based on name alone, celebrity status or the exclusive air of being among the chosen few trumped using good judgment and due diligence got the investor burned.
While I could agree that there are and always will be, many "too good to be true" investment schemes out there, there are also many "unknown" non-celebrity hard working money managers, hedge fund managers, and managed futures account managers that are turning in very good, above average returns for those investors who are savvy enough to do their homework and look for them. I also contend that for every group that lost money with Madoff and others like him, there are those wealthy and not-so-wealthy investors who continue to garner healthy "too good to be true" returns on their money in almost any economic climate. They just do so quietly.
I must state clearly here that in my opinion no investment is "risk free". The very nature of investing involves risk. Furthermore, I believe that every investor needs to evaluate their own risk tolerance as well as what "risk capital" they are willing and ready to potentially lose for the rate of return they are seeking. That said, I believe there are still plenty of opportunities for both the large wealthy and institutional type investor as well as the individual investor seeking those above average rates of returns deemed "too good to be true" by the masses and mass media reporting to them. It just takes a bit more digging and research to uncover them…and of course to thoroughly check them out.
John Dade has been involved in the Financial Markets for over a decade with experience in precious metals, private placement, managed futures and Forex. His firm specializes in introducing all levels of investors to the Forex market. For more information visit http://www.ForexGT.net.
