The reason that the Bernie Madoff investment fraud continued for so long is that he didn’t promise investors that they would get rich quick. He promised steady returns without risk. An offer of a 25% return in one year should set off alarm bells for most investors. Offers that downplay the risk of loss should also.
Recent stock market volatility and the Federal Reserve’s policy of low interest rates have driven more and more investors to unconventional assets, styled “alternative investments” or “exotic investments.” According to one estimate, Americans have some $712 billion in complex investments that claim to provide higher returns without the volatility of the stock markets. Savers are looking for a stable source of income, something that was not so very hard to do years ago. Some of these alternative or exotic investments have soured, leading to action by securities regulators. Among exotics mentioned in a recent New York Times article:
The Securities and Exchange Commission (SEC) offers a wide variety of resources to those who are willing to investigate before they invest. For example, offers of the sale of securities must be registered with the SEC, and important details about them may be found in the SEC’s EDGAR database or by calling its toll-free investor assistance line at (800) 732-0330. The SEC also provides information on the background and qualifications of investment professionals.
Commonsense financial advice also may be had from the SEC investor bulletins, available at its Web site. For example:
For a second opinion on your investment ideas, call on us.
© 2014M.A. Co. All rights reserved. Any developments occurring after January 1, 2014, are not reflected in this article.