Reality Check - Too Good To Be True
While fraud may be in simulated headlines in your Future Financiers event, it doesn't have the real-life consequences. Many people have suffered huge financial losses at the hands of men like Bernie Madoff, who defrauded investors of billions of dollars (estimates range between $10 billion and $17 billion) in the largest Ponzi scheme in US history.
Named for Charles Ponzi, the scheme works by paying investors with money taken from other investors rather than profits from actual investing. So long as existing investors leave their cash "invested", and/or additional investors can be found, the scheme can be mantained for a long time. In Madoff's case, it lasted for over 10 years!
Charles Ponzi defrauded his investors by claiming he would double their money in just 90 days, a 400% annual rate of return! Yet thousands of people were deceived, and his eventual collapse brought down six banks with him. All of this in just EIGHT MONTHS!
Madoff's scheme was more subtle. He didn't promise outrageous returns like Ponzi. His scheme involved a reliable return rather than a high one. Investors simply never lost money! Even when the stock market went through prolonged downturns, Madoff always paid a safe 10% annual return.
However both these men, as well as the many others who prey on investors, share one common theme - they promise something too good to be true.
Whether it be in the stock market or any other financial transaction, the cardinal rule remains, "If it seems too good to be true, it probably is."