Throughout the book, I caution against unrealistic expectations. Why? Having unrealistic expectations or failing to plan for enough growth can expose investors to numerous risks, including falling prey to a con artist.
Ponzi con artists will get anyone they can—no one is immune. They want big investors but are more than delighted to steal from investors with smaller pools. To keep their scam going, they need a steady stream of money, no matter the source. And folks who want easy or big returns with little risk can be good marks for a Ponzi scamster. A con artist knows folks who think big gains are possible without much risk won’t question them hard. Con artists hate being questioned hard.
One standard way these rats operate is how Bernie Madoff did it—who’s currently cooling his heels on a 150-year sentence for his multi-billion-dollar fraud. For years, his investors’ statements (all dummied, as it turns out) showed about 10% growth each year—give or take a bit.
That may not seem all that unusual. Except he wasn’t claiming 10% annualized growth over a long period—which is about what stocks have done historically. His statements showed about 10% to 12% growth each and every year with little variability. Even monthly returns were eerily steady.
Such a thing is not only historically unprecedented (remember—history is a good guide for letting you know if something is reasonable to expect), but it also flies in the face of finance theory. ...