Tuesday, May 8, 2007

Investment Scams

Last night, I was channel surfing and stopped on an interesting infomercial. They were offering an "unique", "simple and easy", and "guaranteed" investment system. Well, when it comes to new investment "systems" I would definitely like one that is "simple and easy" as well as "guaranteed".

The infomercial advertised for a trading seminar that was taught by someone who had been "trading for 25 years". There was no mention of his track record, work history, or even any degrees or certifications he had. The biggest selling point? "It's easy, guaranteed and look at all these people who have made money!!"

These shows always annoy me because they spread the notion that somehow, there is a some secret formula or rain dance that you need to follow, and investment riches comes to you like water.

This simply isn't true. People on Wall Street would not be paid between $100K-$20 Million because they know some secret rain dance. When it comes to it, investment is hard work, and not everyone is cut out to analyze stock or be an i-banker.

Think of it another way. The stock market is a zero-sum game. At most, you can make all the money that is currently invested in the stock market, nothing more. So in order for you to win, someone has to lose. Well, if there was such an easy system out there, who is doing the losing?

In general, the losers tend to always be amateur investors or people following a "plan" or "secret" formula. Be wary of these systems, and consider that financial advisers do actually provide a valuable service.

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