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Investment Illusions

Clark Behind The Headlines

From HLN's Money Expert Clark Howard

This does not compute: the promise that you can make a return of 100% to 120% per year on your money by investing in silver, gold, oil, and other commodities.  But that was the promise made to a number of people who thought they were investing with a particular investment group.  Two men allegedly stole millions by promising people that they had an investment that would produce massive returns. And people are thinking, “Wow, in the bank, I’m earning 1%.  I can multiply that 100 times over with these brilliant people.”  These guys were promising people 100% to 120%.

Well, the allegations by the federal government are that it was a multi-million dollar Ponzi scheme. Apparently, there were no actual investments.  Classic Ponzi. They convinced people that they had these super-secure investment strategies in gold, silver, oil, and commodities.  But all they were doing is paying money out from later investors to earlier investors, who then would say, “You’re not going to believe it.  I put in $1,000 and got back $2,000,” or, ”I put in $50,000 and got back $100,000.”  It seems not a week goes by that there’s not a story like this, where millions of dollars are stolen from people. They buy into a promise that there’s an easy way to make their money grow.

The reality is,  if anybody promises you these “can’t miss” returns, know that you are going to lose.  There are no magic formulas that guarantee you huge returns on your money. If you are looking for something “super safe” and “can’t lose”, you’re going to earn single digits on your money, and low single digits right now.  If you go into things that are “risky” like stocks, over time, you should be able to earn about 7% beyond the rate of inflation.  Here you’ve got people promising more than that over and over again as super safe.  If you don’t understand what the investments would be and you’re buying somebody’s hype or promise, know that you’re going to have your wallet emptied.

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