Bernard Madoff told investors that his techniques were “too complicated for investors to understand”. The disclosure of Madoff’s client list highlights the amount of trust that investors put into their broker.
His victims include high profile people like Sandy Koufax, actor John Malkovich, Larry King and Frank Lautenberg. Even Mr. Madoff’s lawyer, Ira Sorkin, fell into the trap of investing without caution.
The most vital part of investing is looking at the numbers. A company report really is all you have to work with. With only a hand full of paper you have to decide where to put your money, and where to keep it away. Analyze the reports with great caution to reduce risk.
Analyzing company reports asks for more than just doing the math and getting an answer. Oftentimes small, almost invisible clues can prevent an investor from making the mistake of his investing career. One of Madoff’s hedge funds offered returns of 10,5% for 17 years in a row. That same fund reported being up 5,6% even when the total market collapsed during November 2008.
This is the clearest warning sign that his victims have got. Clues this small should raise caution in proposing investors. Though it is not impossible to have honest reports like these, it surely cannot harm to ask some more questions. Digging deeper will make the difference between a good investment and a good rip off.
Ponzi schemes are not the only possible problems investors face. Another, far more familiar obstacle are company reports that say one thing but mean another.
It is common knowledge how easy it is to manipulate accounting records. With the right accountant and the wrong moral system, it is not impossible to make the report say something slightly different than what it really means. And with reports saying things different than it really is, investors run the risk of huge losses if they take the honesty of reporters for granted.
Never ever take honesty for granted. When the matter is regarding money, rather take dishonesty for granted. Do not trust company reports just because they are printed on official stationary.
The people on Bernard Madoff’s list of clients had to find out the hard way that all company records should be analyzed with extreme caution. Save yourself a lot of money, and spend the time to do the math. If anything seems strange or too good to be true, trust your gut feeling. Always exercise a healthy dose of caution before trusting people with your money.