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September 15, 2006 at 10:04 am #119Gina McLauchlanParticipant
This is one carried over from the old forum
Children start learning about money from a very early age. For example, my toddler has recently grasped the idea of buying things, and yesterday demanded ‘a big Thomas the Tank Engine with petrol to make him go’! I told him to wait and see, falling back on the classic ‘ask Granny and Grandad’ strategy…
Sadly, one lesson that many people fail to learn as children is there are more people willing to rip you off than help you with your money. These people may have different job and titles, but they are all interested in one thing only: separating you and your cash.
So, how do we spot the people out to do us serious financial harm? Here are a few clues:
1. What’s in it for them?
Join our magical multi-level marketing programme and YOU could earn £5,000 a month!
Oh yeah? So how much does the recruiter stand to make from convincing me to join this once-in-a-lifetime opportunity? Let me guess: there are ‘upfront membership fees’ or an ‘initial investment’ required before I can board this gravy train. Furthermore, what chance is there that I’ll get something of any real value for my money? My guess is slim or none.
If a scheme involves parting with money upfront, you should start searching for the rats.
2. Why are you still working?
I’ve seen countless ads offering fantastical earnings for minimal effort. My approach is to ask,
“If this is such a guaranteed get-rich-quick scheme, why are you sharing it with others? Surely, you’d be better off keeping this secret to yourself and pocketing all the cash?”
This goes for penny share hawkers, boiler rooms, betting systems, share-trading programs and so on. If it were so damn easy to make shedloads of money, wouldn’t you be doing it using a laptop on your private beach somewhere tropical?
3. If it looks too good to be true
Over the long term, assuming inflation stays at near its current level, you can expect to obtain annual returns of around 4% from cash; 6% from bonds; 9% from property; and maybe 10% or so from shares. So, any scheme promising ongoing annual yields of over 10% is at least as risky as shares. And we know how risky shares are, don’t we: the FTSE 100 index more than halved between January 2000 and March 2003!
Any scheme that offers ongoing annual returns of 15%+ is, without a doubt, incredibly risky or entirely dishonest. Take this high-flying property investment that turned out to be a complete sham.
4. Pyramids are usually founded on sand
Numerous moneymaking schemes rely on pyramids: the recruitment of spiralling numbers of people in order to throw more money into the mix. Sadly, as with Hearts and Women Empowering Women, they turn out to be complete hogwash. Why? Because the numbers required to keep these schemes turning over quickly exceed the entire population of the Earth! Here’s one example.
5. If in doubt, don’t shell out
Have you ever watched someone play a card game when s/he doesn’t understand the rules? Take the hilarious card-playing scene in BBC comedy The League of Gentlemen, where the exasperated hospital doctor attempts to fathom the ridiculous rules of dodgy card game “Go Johnny Go Go Go Go”!
Before you hand over a wad of cash to anyone, sit down with a piece of paper and write down the rules of the ‘game’ you are about to ‘play’. If it’s not obvious how you can avoid losing and keep winning, and you can’t easily explain it to a seven-year-old, don’t hand over your hard-earned dough!
5. No risks – no hassles – no experience needed
No chance! Every decision in life involves risks – turn a different corner and you may be hit by the proverbial bus. Also, every job involves hassles and, somewhere along the line, highly paid jobs involve a great deal of commitment, effort and hard slog. Also, would you hand over loads of money for a service provided by someone with no recognised experience? Hardly!
6. Why have they chosen you?
A few years back, I bumped into an American dentist in a London hotel. After a few drinks, he confided in me that he was on his way to Nigeria to collect his share of a multi-million-dollar fortune that was being illicitly shipped out of the country. I nearly dropped my drink, because he’d fallen for the infamous 419 fraud.
I warned this chap not to go to Nigeria, as he was certain to lose even more than the $50,000 he’d already handed over, and could even be killed. I begged him to call the Foreign & Commonwealth Office for official confirmation that he was being defrauded and was also facing serious danger. I don’t know what happened to him, because I never saw him again.
Ask yourself, why have I been specially selected for this golden opportunity? What’s makes me special? The answer is: nothing, you’re probably just one of countless potential victims.
7. Gambling is not investing!
There are dozens of scams involving organised betting rings. You hand over a few thousand quid, which is ‘guaranteed’ to increase many times over, thanks to the foolproof computerised system of the betting syndicate. So, why bother with the daily grind of recruiting punters to share the wealth, instead of using dead-cert bets to make you fabulously wealthy?
I’m guessing that it’s only a matter of time before the Department of Trade and Industry steps in and starts closing down these firms with their promises of untold wealth through gambling. It reminds me of an Andy Capp cartoon from way back:
Vicar (to Andy): “Where are you going on holiday this year, Andy?”
Andy (warily): “Two weeks with the wife’s mother in Bridlington.”
Vicar (to richly dressed bookmaker): “What about you?”
Bookie (proudly): “Four weeks in Bermuda.”
Vicar (to Andy): “Now do you see what I mean about gambling?”
Andy (thinks): “What is he on about?”8. Getting rich slowly is a good move
The world’s richest man, Warren Buffett, has a $35 billion fortune, made entirely from investing. If you’d like to join him (you won’t, but you can at least try!), start here.
Oh, and by the way, if you still want to double your money today, simply fold it in two and put it back in your pocket!
More stuff like this at: http://www.fool.co.uk
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