Be aware of unrealistic returns: Investment expert
Head of Growth Market Solutions at Sanlam Personal Finance Karin Muller says if it sounds too good to be true - it probably is.
She has been commenting after reports that alleged scheme, MMM Global collapsed. Muller says while it is not easy to identify a ponzi scheme consumers should always ask questions.
"In terms of the Consumer Protection Act if something gives you a return of more than 20% above the repo rate then you have to start asking some questions," she said.
"If the return is that high then how do you enable it to be so high? So it is out of the norm of what investments normally give you," Muller said.
Muller's explained that in a ponzi scheme there is no underlying investment that generates a return. She says consumers get returns from the money given by the next person to join.
"A normal investment invests into something and that gives you the returns. So when you invest in a unit trust the unit trust company buys shares and as the companies invested in grow and make profits then those profits are given back to you as a return," she said.
"A Ponzi scheme robs Peter to pay Paul and there is nothing real underneath it that drives it," Muller said.
(File photo)