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No Way To Easy Money

14 Dec 2012 9:53 AM -
here’s one myth that’s really worth busting before the year goes out.
 
It’s the mistaken belief that there are people who can forever pick winning investments and never lose money.
 
Once again we’ve seen a group of investors wiped out by an investment business that claimed to have ongoing returns of 20-25% a year.
 
This time the damage was done in Wellington, New Zealand, by a company called Ross Asset Management (RAM).
 
Head of the business, David Ross, was known as a modest man, happy to share a coffee or meal with clients; an approach that was a hit with many local farmers.
 
Of course, those farmers entrusted Ross with the majority of their money.
 
Ross was said to be holding investments over $400 million, yet when PricewaterhouseCoopers came in to check the smouldering remains, they only found records of $10 million.
 
Unfortunately, the money from investors kept rolling in all the way until the end.
 
As one client said, Ross “seemed to know everything about what was going on in the market, and he had a fantastic track record for picking the market.”
 
And this fantastic track record was supposedly in high risk, speculative mining shares.
 
One industry source suggested RAM’s returns were surprising given small mining companies hadn’t been performing well.
 
However, RAM’s returns were reported without verification or audit, so producing ‘surprising’ results would have been very easy.
 
RAM also never used an independent custodian to hold investments, nor did it have any transaction statements, portfolio valuations or contract notes.
 
As is usually the case, the better the returns (or alleged returns) from an investment, the less questions investors tend to ask.
 
While again this is very sad news for the investors, there is an upshot for the reader because they don’t have to ever make the same mistake.
 
 There is no such thing as a continually positive return when investing, especially in the double digits.
 
Investing in such a scheme probably means you’re likely to suffer the same fate as those Wellington farmers – losing everything.

It’s never too early to invest in your future