If an investment sounds too good to be true… it usually is!

KUALA LUMPUR, May 15 — Illegal investment schemes such as money games promising 20 per cent monthly returns are unsustainable as legitimate investments usually only get up to 12 per cent annual returns, a licenced financial adviser said.

Yap Ming Hui said investment options such as equity or unit trusts investing in stocks with high risks and offering high returns could on average “touch 12 per cent a year but over a three to five-year period.”

“You get that (12 per cent) provided you have selected the right fund. It’s not guaranteed,” he told Malay Mail Online.

He said most Malaysians fall for unsustainable schemes as it fits their criteria of a “dream investment” — an uncomplicated plan promising guaranteed high monthly returns such as 20 per cent and that does not require effort to understand.

“They want it fast. They want it immediately in one month or two months. They can’t wait say three years, five years. Then it’ll be selling like hot cakes, but the biggest problem is it’s not sustainable,” he said.

While some may have truly believed such “dream investments” exist and invested after a trusted friend or family member promoted it to them, others know it is a scam but think they can “outsmart the scheme operator.”

The latter group believes that they would obtain high profits “unscratched” if they invest and exit the scheme early before it collapses, he said.

“They may come in early, get some good returns but they become greedy so they want to have more, they come back again until at one point it explodes… human greed is something very difficult to control,” he said.

Scams in different guises

Another licensed financial adviser, Annie Hor, said she gets calls every year from clients who seek her advice on whether to invest in such schemes which may involve cafes, wine, oil, gold and forex.

“They may operate in different companies, products and services but generally it all sounds the same at the end. And it’s easy to actually fall into this trap because human nature is greedy.

“When I share with my clients, investments that generate possibly… and the word is possibly… 8 per cent per annum, they tell me it’s not fast enough. They want short term, quick monies, quick gains,” she told Malay Mail Online.

Millennials who get caught up in such schemes may influence their parents and family members to join as they themselves do not always have enough funds, Hor said.

“There are also middle-aged professionals who fall for this. One reason given to me is ‘I am a bit desperate. My industry is not doing so good and I really think this is a good scheme. Plus, my friends have been getting their monthly 8 per cent payout’,” she added.

Datuk Tan Chong Guan, who chairs the Direct Selling Association of Malaysia’s Ethics Council Malaysia aimed at curbing investment scams, said it was impossible to both generate and guarantee the high monthly returns promised by the illegal investment schemes.

“Let’s say you invest in higher risk businesses like stock, the return may be 10 per cent per annum. Usually for companies, it’s very hard to promise a monthly return. Say you have RM10,000 now, what can you invest in over the next 30 days that can give you 30 per cent? You look at proper businesses, most investments take time to see returns,” he told Malay Mail Online.

Buyers… or investors, beware!

Hor said Malaysians should stay away if they spot red flags such as the investment company not being backed by Bank Negara Malaysia or the Securities Commission, or is a company with a paid-up capital of RM2.

“If the company tells you the offer is only for today, then be strong and walk away. Or when your family feels it sounds fishy, avoid it all together. Talk to unbiased friends who can give you sound advice before deciding,” she said.

Licensed financial planner Kevin Neoh said a relatively low-risk investment such as a fixed deposit would likely generate 3 to 3.5 per cent per annum and investors should avoid schemes that promise risk-free high return rates at all cost.

He believes there is a lack of enforcement by authorities, adding: “I think that the authorities have to do something like mystery buyer, or sweep the market for such schemes and expose them earlier… be more proactive, not passive.

“I guess the most important thing is to conduct a thorough due diligence process on

any investment opportunity, no matter how good your neighbour or family members tell you it is,” he said.

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