40% RETURNS! Too good to be true, yet why do people still keep falling for it

This gold investment, to put it squarely, is too good to be true.

In the beginning, when you first purchase gold with the company, they will hand the solid gold bar to your hands to prove their sincerity.

As if that is not enough, they will sign a contract with you, offering you 1.5% to 3% monthly interests, meaning 18% to 36% per annum of lucrative returns.

If you buy a million ringgit worth of gold bars from them, you will be entitled to RM30,000 of monthly interests, or RM360,000 a year!

The same amount of investment, if put in a fixed deposit account with a commercial bank, will only yield about RM30,000 a year.

The returns will be even higher if gold prices soar.

So, some sell their houses and empty their bank savings to invest with the company, while others take their investment a step further, relinquishing their jobs to become full-time agents for this company.

It is said that some 60,000 have entrusted their fortunes to this company during the past one or two years.

Several months back, a company bearing the same name and associated with it in Singapore was reported to have encountered financial problems. The company was later raided by the authorities after investors lodged reports having failed to receive their promised interests.

Before long, the company in Malaysia was put in Bank Negara's watch list, its assets frozen pending investigation.

We cannot pass down any verdict before the probe is concluded. Sure enough I hope the investors and agents would escape losses and have their investment sums recovered.

40% returns

If we were to scrutinise this incident carefully, we should be able to draw some good lessons from it.

In the very beginning, the gold bars which they hand over to you are indeed genuine, certified gold bars that are nevertheless sold to you at a price 25% above the market value. In dither words, they have already made some good profits from selling gold to you.

Thanks to the profit margin, they are now able to provide unrealistically high interest rates to lure investors.

In no time, the company has managed to draw massive investment funds to sustain its operations and honour the pledges it has made to customers.

Nevertheless, such operations are not sustainable over the long term unless the company has special investment channels that would yield 40% of annual returns in order to disburse to its clients as interest incomes.

40%! A figure that not even Warren Buffet could dream of. Buffet recently admitted that it would not be easy to even get 10%.

What is left will have to wait until the music stops and see who are unlucky enough not to grab a chair. These are the people who have refused to pull back from their investments and have continued to dump their savings into the bottomless pit.

Who is to take the blame eventually?

No way could the authorities be spared. There is always a grey area in gold investment which be could manipulated by irresponsible quarters for their own benefit.

Meanwhile, the investors must also question the rationality of raking in incredibly good returns without having to move a finger or put on a thinking cap.

Think about this, and we should see what has actually gone wrong.

-Sin Chew Daily