The recent US$50 billion fraud scandal by a Hedge fund managed by the former Nasdaq chairman is a near-perfect example why pyramid & ponzi schemes are simple tools to continuously deceive and plot one's and other investors' downfall.
It doesn't take a fund manager such as the former chairman to concoct such pyramid & ponzi schemes as history has shown but the vast amount of $50 billion dollars is a lot of money. Why anyone falls into the trap is easy to understand at times, given the lack of some form of transparency in Hedge funds & its aggressive tactics/strategies/tools, but for that reason alone, it is the need for transparency even in mere simple financial transactions that can make a huge difference.
Investors should know where their money is placed. Huge returns over and above market returns, are generally not sustainable. Knowing what pyramid schemes are in the first place is good idea...Here's a nice, short article from Investopedia on 'What is a Pyramid Scheme'.
Have a good read.
It doesn't take a fund manager such as the former chairman to concoct such pyramid & ponzi schemes as history has shown but the vast amount of $50 billion dollars is a lot of money. Why anyone falls into the trap is easy to understand at times, given the lack of some form of transparency in Hedge funds & its aggressive tactics/strategies/tools, but for that reason alone, it is the need for transparency even in mere simple financial transactions that can make a huge difference.
Investors should know where their money is placed. Huge returns over and above market returns, are generally not sustainable. Knowing what pyramid schemes are in the first place is good idea...Here's a nice, short article from Investopedia on 'What is a Pyramid Scheme'.
Have a good read.
2 comments:
Hi there,
I came across your excellent comment on Local Freakonomics (I'm from Belait). I've been passionately interested by the issues that you touched upon. I've been working in finance for over 7 years now and have just finished my Masters. To sum up my experience and knowledge, finance for me boils down to: To get higher returns, one needs to take bigger risk. Also, the compounding effect of time on stable returns is what one should mainly be relying on. I'm more of a tortoise more than a hare.
As far as financial planning is concerned, I agree that it's difficult to find financial planners that 1) know their stuff 2) are impartial and prioritise their clients' interests instead of their commissions. Also, there's a lot of work to be done to educate the consumer as well, like you said, a little knowledge is a dangerous thing and complicated (i.e. expensive) solutions aren't necessarily better for the client. Unfortunately, some people don't want to necessarily hear boring information and only want to be told what they want to hear. Also, even though I know a bit about finance, one of these days I'd definitely seek a second opinion from at least one CFP.
http://orwellthatendswell.multiply.com/journal/item/2232/Financial_Planner_Qualifications.
Your comment also led me to your islamic finance blog, which brings me to the next issue.
I'm trying to help someone who's doing her IFQ (Islamic Finance Qualification), could I get your email address as I'd like to ask your recommendations about some islamic finance resources?
I found a few that I shared on my blog that you might find useful yourself
http://orwellthatendswell.multiply.com/journal/item/3522/Islamic_finance_in_pictures_slideshows_and_video.
http://orwellthatendswell.multiply.com/journal/item/3505/Islamic_finance_links.
Best regards,
Orwellthatendswell.
rmahmud77[at]google[dot]com
Thanks for your comment. I've been away or so, and I didn't have a chance to reply.
To be honest, I'm a student of finance myself and am not a certified financial planner or anything. But if you have any queries on Islamic finance, I'll try to answer or so.
Email: Umar.Afa@gmail.com
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