December 23, 2014
Bernie Madoff promised guaranteed returns of 10% or more. Why should people have challenged that? Options?
Bernie Madoff promised guaranteed returns of 10% or more. Why should people have challenged that? Options?
No one can guarantee a return at that rate. The only time you have a guaranteed return is with life insurance and that is a guarantee you pay with with locking your money up and high fees. You have to know that there will be years that you will not make much at all and years you will lose money, that is the risk in investing, if it was a sure thing then its not investing. One option is to manage your own money and not let other people mess with it, just use Vanguard or other self service options. Dont get caught up on people who are doing so amazing with their returns, if its to good to be true it likely is.
Well said, Garrett. Let’s review.
Generally, it is life insurance products that make the highest guaranteed returns. They do this by locking up your money for long periods of time as they earn money off your money prior to giving it back to you many years later with returns somewhere around 3% or so. You can do better. Much better!
As for Madoff, those guarantees were fools gold and nothing more. He was running a ponzi scheme as he paid old money with new money that was coming in. There was no investment going on, just a shell game. NO ONE can guarantee you returns beyond 5% or so. If they do, run away. Run away fast!
As for earning returns close to 10%, stick with those very cheap and efficient no-load index mutual funds. Focus on owning stock from all over the world as you diversify your investments over many sectors of the planet (focus on the fama and french research to increase the potential returns by owning more small and value stock index funds).
The guaranteed returns will not be there, but the average return over time could net you 10% or so after all costs (focus on getting your portfolio costs down to .10% or less as you invest in your retirement account at work and a Roth IRA at a place like Vanguard) are factored in (an 80% stock and 20% bond allocation would serve many people quite well over time).
The key is knowing what is real and what is make believe sold by people like Bernie Madoff. Education will guide you down the path toward becoming the wise and efficient investor. Awake to the possibilities!