ALTERNATIVE INVESTMENT SCHEMES
Introduction
The alternative investment schemes are popular because of the extremely high interest rates being offered – an average of 10 per cent per month – and they see a real chance of lifting themselves out of poverty. Those who are caught up in the vortex of greed are mesmerized and are willing to risk their money for the prospect of a comfortable life. Many have worked all their lives, saved and invested their hard-earned money only to receive a little pittance, while they see the owners and executives of the established institutions which receive their money are living the extra mile.
Ironically, the recent collapse of alternative investment scheme companies with losses estimated as high as 0 billion, has left a lot of people surprised. Many believe that it was the formal financial sector which brought down the schemes. They say that the sector was concerned about losing funds to the informal sector and conspired to bring about it’s downfall by pressuring the financial services sector to close down the companies (2003).
The efforts of these companies to spread the wealth around is admirable, but they failed to use some basic investment strategy. First, most companies forgot that you do not use short term money to invest in long term assets such as businesses and property. Secondly, companies breached the rule that if you are taking money from people they must be able to account for it by refusing to present financial statements.
Predicament of Alternative Investment Scheme
Others believe that the companies involved in alternative investment schemes were nothing more than pyramid schemes. A pyramid scheme operates on the basis that money is paid out of new proceeds being received and not on any earnings that are generated (2000). This scheme obviously will depend on people continuing to bring in new money which will only happen as long as there is confidence in the scheme. Of course given that no income is being generated, it will inevitably fail.
Furthermore, the 1990s meltdown of the local financial sector left thousands of depositors confounded and out-of-pocket because of the issue of alternative investment schemes. The current level of participation in these financial schemes is close to unprecedented, and logic suggests that there is a good reason for their popularity. Moreover, there are several standpoints which need to be faced frontally, not merely from a point of view of those who have been victimized. The owners and investors in the schemes must be dealt with accordingly together with their perceived competitors, and the established financial institutions.
Olint and Cash Plus
The two leading alternative investment schemes were Cash Plus and Olint. And they are slowly, but surely, being revealed as fraudulent. Initially, everything was rosy. Olint was once hailed as “a revolution in the local investment scheme” (, 2008). In 2006 the founder David Smith was lauded as “Business Personality of the year”. Cash Plus was supposed to be another financial miracle. It (apparently) acquired real assets including the and the 800-acre . The founder boasted of investments in telecoms, financial, shipping, hospitality, fuels/chemicals and real estate. He claimed that he was going to build up an array of businesses in an “expanding and diversified portfolio of companies”. But there was no real documentation about how these, and other such investment schemes were making their money. Yet people did not seem to care and still invest without actually having a firm background of what they are getting into.
Conclusion
People’s greed always gets the better of them.“Get rich quick schemes” will not solve financial problems in a snap. People need to be risk-takers as entreprenuers. What is needed is a national debate, where looking at the issue as a national family will bring the nation together. Determining if these non-traditional means of prosperity should be accepted as a sustainable alternative to most poverty will harm us in the long run if people will not equip themselves with the right knowledge.
Research and think first before investing. It is important to remember that investors can easily avoid fraud by spending a little extra time verifying the validity of all potential investments. It is rare for an investment scam to pass a thorough due diligence process. If all else fails, instinct and common sense may serve a skeptical investor best: If something seems too good to be true, assume that is until proven that is not a counterfeit.
Reference
In retrospect, 2008 will be seen as the year that the alternative investment scheme bubble burst.
Mixed signalAnd in this respect, we await the early enunciation of the policy of the new government on this issue, certainly before it gets to the point where it tears our nation apart. It is clear that nerves are getting more jangled every day and we ignore this at our peril.
. We will require your balance sheet and we will demand that you prove capital adequacy.” What we will require, however, is your profit and loss statement
Get back to basics
, whose background is in investment promotion, chided Jamaicans for putting their hopes for upward mobility
innumerable other financial wrongdoings and scams. I took one thing away from all my years of investigating the good, the bad and the downright criminal. That is, if the return on an investment is too good to be true, it is exactly that. It is not true. This is not a difficult principle to understand. But somehow
Credit:ivythesis.typepad.com
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