Experts like to warn investors to avoid opportunities that offer high investment returns over a short period, saying that when the yield looks too good to be true – it usually is. But understanding investment risk is more complicated than that. The recent performance tables released for South Africa’s unit trusts show that the best funds would have delivered staggeringly high returns, double-digits over three months and as much as 100% over a year. Those are very respectable funds in which to invest, as you are dealing with reputable managers and your funds are in regulated investment products. So how else do you separate the good investment opportunities from the dodgy ones? Kalyani Pillay, CEO of the South African Banking Risk Information Centre , shares some tips. In a nutshell, these include: Watch out for schemes that reward early investors . They could be pyramid or Ponzi schemes, with no underlying assets generating the returns; Be wary of schemes that provide guaranteed returns. It is very difficult for investment professionals to consistently deliver superior returns, so when these are guaranteed your alarm bells should be ringing; Find out whether the scheme provides incentives for bringing more people into the net. If commissions are offered for encouraging friends and family to join, step back and think again; Figure out where the money comes from. Investments should be easy to understand. If the promoter wants to keep the details a secret or asks you to sign a confidentiality document this could be a sign you are entering a dodgy money scheme. If you want to enjoy high investment returns and avoid the risk of losing your money, there’s no substitute for putting time into researching your investment options – and that includes the details of the company that is offering to […]
