web analytics
April 28, 2015 / 9 Iyar, 5775
At a Glance
Blogs
Sponsored Post


The Investment Scam That Will Wipe You Out

Goldstein

A new fraudster has just turned himself into the police for defrauding investors out of millions of dollars (or shekels, actually, as this guy was in Israel). But the story is the same as when Mr. Ponzi himself was inventing the Ponzi scheme.

Want to blame the government or the regulators? As they say, all that blame and five bucks will get you a cup of coffee. I would not want to blame the victim, but let’s look at some of the facts in the case. In fact, these points are the same in almost all of the fraud cases I have read about in my two decades on Wall Street:

The clients gave money directly to the investment advisor.

The clients did not get statements from a bank or brokerage account.

The clients believed the investment advisor who said he could make totally unrealistic gains … guaranteed!

The clients believed there was little or no risk.

If these clients were children or severely mentally incompetent, I would agree with the argument that we need stronger regulations and better government oversight. But in the most recent case in Israel, and if we look at the biggest scandal ever – Madoff – we see that the clients were often very sophisticated professionals who were very experienced in all aspects of business.

Rather than going into the behavioral finance explanations for why even top-tier investors let greed trump caution, let’s get practical. (If you do want to learn about the psychological aspects of what makes people do the wrong thing, you can listen to my interview with Nobel Prize Laureate Daniel Kahneman on my radio show. You can see that interview on YouTube.)

In this blog post, I want to make only one basic point, and if you finish reading this article with this one take-away, you can feel pretty confident that you won’t get suckered into a fraudulent investment scheme. If it sounds too good to be true, it probably is. This idea came from my mother (also a Wall Street veteran, and author of a book for children about how the stock market works).

If Ponzi scam victims considered this core concept before getting involved, this is what they might have thought: “You’re promising me 1.5% profit every month. What do you think I am? Stupid? Not even Warren Buffet can do that.”

They would have continued to think: “You are guaranteeing my principal? Who do you think you are? A government guaranteeing its bonds? Germany guaranteeing the Greeks? You couldn’t possibly have enough money.”

Finally, they would have considered who custodies the money: “You are saving me the trouble of opening my own bank account and putting my money into your own account? And then you will just print up statements on your own laser printer? Come on, buddy, I wasn’t born yesterday.”

Which investment scammer has you in his sights? Who knows? But one thing is for sure – if you start by asking the most basic questions and not believing the unbelievable, you’re well on your way to protecting yourself. The scammer will just move on to his next victim.

About the Author: Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning and investment services firm located in Jerusalem. He specializes in working with clients who live outside of the United States and want to maintain a U.S. brokerage account. Doug’s newest book, co-authored with Susan Polgar, about how using chess strategies to improve your finances, Rich As A King can be purchased at www.richasaking.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Contact at doug@profile-financial.com


If you don't see your comment after publishing it, refresh the page.

Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.

If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.

No Responses to “The Investment Scam That Will Wipe You Out”

Comments are closed.

Current Top Story
Aftermath of a rock-throwing attack in Samaria.
Arab Teen Attacker Shot, 2 Israelis Hurt in Attacks
Latest Blogs Stories
Moment of Silence 1

By not standing you are drawing distinctions between religious & secular, AND religious & religious.

A Soldier's Mother

Israel’s radio is like a voice from home…

empirestatebuildinginnewyorkgeneralview4361.jpeg

Truly, in the modern world, we live in the time of ‘What’s in it for me?’ The time of the ‘selfie’!

A Soldier's Mother

My final reaction remains – who builds a mountain of ashes, who turns it into a “tourist” site?

Is the recent increase in Arab terror attacks related to the fact that there’s no new government?

They called it “religious coercion” but it was really “secular coercion” and secular intolerance.

One exciting element of traveling is that it was my first time ever doing so as a dual-citizen!

Attackers of this innocent religious solider had been brainwashed that Israel is evil & illegitimate

How can you take care of the one you love and look after your finances at the same time?

Celebrating 67 years of democratic independence, surviving wars&threats; so much to be thankful for!

He was a Torah giant, uniquely exemplifying the Hashkafa of Torah U’Mada (Torah & worldly knowledge)

All Israel walks beside them, holding them in our hearts, listening, our hearts breaking with theirs

I’ve felt that if only we had established these communities sooner, then the victims would not have been killed

Is inflation always bad for the economy, and why is deflation not always an ideal situation?

It is the character of the individual that counts, not his sexual preferences.

Bibi gives a great speech, especially when talking to foreigners, but on policy, he’s very weak.

More Articles from Doug Goldstein, CFP®
Doug Goldstein

How can you take care of the one you love and look after your finances at the same time?

Doug Goldstein

Is inflation always bad for the economy, and why is deflation not always an ideal situation?

Watch this Doug Goldstein video to learn how easy it’s to open a US brokerage account from overseas.

Poverty has become a thriving business; Learn how the payday loan has affected many US households

How do money managers take care of your money? And have you ever heard of “socially responsible” investing?

What are common market risks and how do they affect your investments?

Laura Adams, author of Money Girl’s Smart Moves to Grow Rich, managing your money more effectively

Why do you need to file an FBAR if you’re a US citizen abroad? What happens if you don’t?

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/the-investment-scam-that-will-wipe-you-out/2012/06/10/

Scan this QR code to visit this page online: