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Johannesburg - Peter Dempsey, deputy chief executive officer of the Association for Savings and Investment South Africa (Asisa), says a personal investment, which appears to be too good to be true, is sometimes just that.
Greed drives humans into making silly decisions about investing in pyramid schemes and all sorts of investments where massive returns are promised.
“Human beings are not always rational and logical… they are subject to emotional stimulus,” says Dempsey, pointing out that thousands of people were duped by SMS messages bombarding their cellphones.
Access codes
The SMSs say: “You have won one million pounds in such and such lottery. Call so and so to collect your winnings.”
Dempsey says that so many people do indeed phone so-and-so, who asks them for their bank account details to pay in the prize winnings.
They then hack into your account “and take your money”.
Dempsey comments: “You would think that no one would do that rationally. Greed creates that sort of blinker.”
Once the person is duped, they are too embarrassed to talk about it. Some of those duped offer access codes over the telephone, which is a huge no-no.
"Don’t do it, don’t respond to these SMSs", Dempsey says.
More reasonable
The same goes for investment products which are too good to be true. They offer a 30% or more return, yet at the moment money market products offered by banks give around 4% to 5%.
Most people would realise that a 30% return is most unlikely to be possible, but when an offer comes in at 15% or 17%, that appears more reasonable.
“It's possible that the company offering the product has some market information that the rest of the industry doesn’t have… it may be possible, but it's most unlikely.”
Avoid the product
To check on the products, do three things, says Dempsey.
* Ask how the company can give a return that is way better than the rest of the market. Ask them to explain to you how they do it.
* Don’t believe their marketing material. Even if it is a reputable company, still find out how they can offer a massive return.
* Check with the Financial Services Board if the company is registered with them and is licensed to offer the product concerned. If they're not registered, you don’t know who their regulator is, so avoid the product.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share a personal story
* Ask the experts
Greed drives humans into making silly decisions about investing in pyramid schemes and all sorts of investments where massive returns are promised.
“Human beings are not always rational and logical… they are subject to emotional stimulus,” says Dempsey, pointing out that thousands of people were duped by SMS messages bombarding their cellphones.
Access codes
The SMSs say: “You have won one million pounds in such and such lottery. Call so and so to collect your winnings.”
Dempsey says that so many people do indeed phone so-and-so, who asks them for their bank account details to pay in the prize winnings.
They then hack into your account “and take your money”.
Dempsey comments: “You would think that no one would do that rationally. Greed creates that sort of blinker.”
Once the person is duped, they are too embarrassed to talk about it. Some of those duped offer access codes over the telephone, which is a huge no-no.
"Don’t do it, don’t respond to these SMSs", Dempsey says.
More reasonable
The same goes for investment products which are too good to be true. They offer a 30% or more return, yet at the moment money market products offered by banks give around 4% to 5%.
Most people would realise that a 30% return is most unlikely to be possible, but when an offer comes in at 15% or 17%, that appears more reasonable.
“It's possible that the company offering the product has some market information that the rest of the industry doesn’t have… it may be possible, but it's most unlikely.”
Avoid the product
To check on the products, do three things, says Dempsey.
* Ask how the company can give a return that is way better than the rest of the market. Ask them to explain to you how they do it.
* Don’t believe their marketing material. Even if it is a reputable company, still find out how they can offer a massive return.
* Check with the Financial Services Board if the company is registered with them and is licensed to offer the product concerned. If they're not registered, you don’t know who their regulator is, so avoid the product.
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share a personal story
* Ask the experts
