4 red flags of an investment to avoid with your BEE returns


You are one of the lucky few who have cashed in on the investment they made in a BEE share scheme of a less glamorous state owned enterprise five years ago. Your friends who opted for a flashy JSE listed company wish they had gone on a spending spree with their hard earned money. Dismally, they only salvaged less than 30 percent of their capital. Your gamble paid, theirs didn’t. It’s all the cruelty and reality of the game of investing.

Buoyed by the princely returns you earned, you are being tempted to invest in an investment scheme which promises returns that defy the current tough economic conditions. Who can’t find an 80 percent return per month irresistible!

Before you get carried away, allow sanity to prevail. Perhaps you might have not heard: the financial services market is awash with smooth talking swindlers masquerading as investment ‘experts’ who can promise to multiply your money in a short time. You must have heard about some people losing their life time savings to ‘get rich quick schemes’ like Defencex and Sura Pure Drinks and a host of others that have left the gullible destitute.

The long and short is that don’t entrust your money to an ‘expert’ who runs ain investment scheme that operates on the following principles:


1)    “Hurry while stocks last.” Doesn’t this sound familiar from the print and media adverts flighted in our electronic media outlets? This ploy is intended to create a false self of urgency, to force people not to invoke their gut feeling.

2)    There is nothing like a free-lunch. If it does come, there is always a colossal cost somewhere attached, a catch. Scammers use this principle proficiently. It may come in different disguises. For instance, an offer of free-lunch at an investment seminar you may be invited to attend might oblige you to invest.

3)    “Your friends are swimming in money, why don’t you?”

 Scammers use peer pressure to push their deception. Fugitive Barry Tannenbaum of the infamous Frankel Investments fished his victims amongst the close-knit and cash flush Jewish community in Johannesburg. Being someone who had amassed enormous clout and had high profile clients who had benefited to his name, few questioned his credibility. And there is no prize in guessing what happened next!

4)    Given a choice of a double dig return on an investment  of more than 50% a month or a low single digit one, of say 5% a month eroded by charges, it does not need no rocket science to determine what anyone would go for. Even the country’s established and reputable ‘big four’ financial institutions with impeccable track records or consistently performing JSE-listed companies do not promise lofty level of returns.

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