Saturday, November 17, 2012

No limits to Greed

Newspaper reports are filled with news about the arrest of a couple involved in a scam involving anything between Rupees Five billion to Rupees Eleven billion. Investors were offered a return of twenty percent per month. 

Evidently,  Investors came rushing in, giving their hard earned money to the husband and wife team. As happens with all such plans, the money was not returned.

There was criminal intent on part of the couple - that is clear. Law will take its own course.

But, what of the people who gave money expecting 20 percent returns per month.

Surely, these investors are also guilty of extreme greed!

Unfortunately, it is the families of the investors who will suffer the consequences of such greed.

The bank interest on fixed deposits (which can be considered the risk free rate of return) is 9 percent per year. The scam was offering a return of 240 percent per year. Surely, such returns were impossible to obtain! Yet, so much money came in.

The scamsters said they will invest in the stock market and obtain returns of more than 20 percent per month. People believed them. The stock market is perceived to be a magic wand which can give as much as a person wants. The truth is very different. The stock market is a business,and, like all other business, it offers a normal rate of return - if you get 20 percent per year you are doing well.

Expectations of returns from the Market should be reasonable. Do readers understand this?

Notes on the New look for the Blog

The default view for the blog has changed from timeslide to magazine. On the left hand corner in the top of the screen, there is an option called 'Magazine'. If you move your mouse there, you will see many options - which are different styles to view the blog. This includes "classic" which was the earlier format. Please experiment with different options.


Dinesh said...

Dear Sir,
The risk level is directly proportional to the return expected. Although we can not avoid the risk completely, I think it is better to take moderate / calculated risk so that one can enjoy the market forever. Taking high risk can knock the person out of the market.
A claim of 20 % per month was enough to smell a rat. I think 1 in million can make that sort of money but such kind of easy offer to public at large should have been enough to maintain a good distance. Let us hope, people recover quickly from this shock.

vinodshegde said...

Haha sir, I just rolled off my chair! I am sure the couple was one of those people who saw the ticker bars and thought when stocks can move 5% in a day, why on earth can't we make like 2% a day?! Should be easy right?!!!