Too good to be true? (part2)

Correspondent | Monday May 18, 2015 15:37

The fact is, there’s no easy way to make money. There’s a chance that you might be lucky, for example with a win at the casino, but we all know that most money gambled is lost – it goes back to the casino to pay for the facilities, the staff, the profits.

 

Internet Schemes

“Mothibi’s uncle tells him he’s invested money in an internet trading scheme that pays him 1-2 percent profit per day. Mothibi goes to his bank and agrees a personal loan of P50,000 to send over to the scheme. Later he hears that people are skeptical about how the scheme can make such high returns…”

Mothibi’s now wondering how to get his money back from the scheme – but now their website isn’t working and everyone he speaks to tells him it’s likely that his money is gone.

“Ponzi” Schemes and Pyramid Schemes “A Ponzi scheme is a scam (a fraudulent investment) that promises high returns to investors but pays them from their own money (or the money paid by other investors), not from investment profits.

A Ponzi scheme attracts new investors by offering high returns, far beyond normal investments. But, to keep the high returns going, more and more new investors must be recruited.

This recruitment process requires members to recruit new members, which forms a “pyramid” type structure. The scheme promises that: the more people you recruit ‘underneath’ you, the more money you will make.

Ponzi schemes will always fail eventually because the returns paid to early investors is higher than the earnings of the system. When the scheme ends, no original capital is returned - that money has already been removed by the people behind the scheme

The most well known Ponzi scheme in Botswana was the Eurex Trade scam. Money was sent by Batswana (often by cash transfer) ending up as far away as Russia and Panama. Most investors lost everything when the scheme closed overnight.

The most recent scheme to come to light is where Batswana have been offered to buy Gold – in tiny slivers laid into a plastic card. Scheme members are asked not only to send money overseas, but to recruit more members, and earn from their sales.

The problem here is the Gold is far too expensive, and when you come to sell it, the buy-back price is only half what you bought it for.

Again and again in recent times, we hear about money-making opportunities that sound too good to be true. When faced with something that sounds too good to be true, beware. It is usually a scam.

“So how can we guard ourselves against being conned?

Put simply, we must educate ourselves.”

 

But is it that simple?

When deciding where to invest, listen to what the investment is about and what the returns are and, decide if you are convinced by the person presenting it. But what is the safest way of making this decision? What tools can we use to guide us?

 

Be skeptical: Ask

lots of questions.

The more questions you ask, the better picture you will get, the harder it will be to fool you. To protect yourselves against fake investments ask:

 * What does the company do, how does it make money?

 * Where is the company based, can you visit their offices?

 * Where is the investment regulated and licensed?

 * Where does the money come from to pay the investors profits?            lAre the returns realistic?

* What are the risks?

*Who is trying to sell this investment to you? Why? What’s in it for them?

*Who will buy the investment from me if I need my money back?

* Check with a Qualified Financial Adviser - one who is registered with the Association of Botswana Financial Advisers (ABFA). (You can find out more about ABFA and see their members at www.abfabotswana.com)

* Check with NBFIRA – the Non Banking Financial Institution Regulatory Authority (You can find out more about NBFIRA at www.nbfira.org.bw

* Never send Cash – no legitimate investment works through cash transfers.

* Do not take financial advice from someone over the internet or over the phone. Always meet the representative, and ask for a copy of their Omang or Work Permit.

Do not be afraid to ask questions. If somebody is persuading you to invest your money, you have the right to ask whatever you need to know.

Remember, if it sounds too good to be true, it is usually not true! Walk away if you have doubts.

Author: Tshepiso Kgakatsi – Training Manager with S.C.I. Training (Pty) Ltd. © S.C.I. Training is a BQA accredited training institution specialising in Financial Education. We also offer Ethical Collection services for companies with debtors and Debt Counselling services for those in financial distress. For help and information contact 318011 or 72309718 or money@wellness.co.bw