Friday Finance: how good is ‘too good to be true’?

This is an extract from The Poor Man’s Guide to Financial Freedom: A Realistic, 10-Step Manual to Building Liberating Wealth on a Small to Medium Income.

“If something seems too good to be true, it probably is.”

The easiest way to spot a scam is to understand what returns are reasonable, and what returns are not.  Here is a quick recap:

Cash:  A term deposit or high interest account might provide a safe return of about 2-3% return in normal times, or 6% in special cases such as shortly after the Great Recession began. [Edit: cash rates now extremely low, often less than 1%.]

Bonds:  Investment-grade bonds might return around 4% on average over the long run [Edit: now lower, maybe 3% if you’re lucky.]  Returns are variable, and negative returns are possible, though these are usually limited to a drop of a couple of percentage points.

Shares:  The stock market is highly volatile and may offer a return of around 8% over the very long run.  Much higher short-term results are possible, but these are extremely uncertain as no one knows what will happen day-to-day.  The prospect of suffering a loss over periods less than a decade is high. [Edit: over 10 years, the chances of making a loss are historically around 20%. Over this timeframe, it would likely be a small loss. Investing for 20 years or more, the chances of suffering a loss on the stock market are negligible.]

Real estate:  Returns are perhaps comparable to the stock market over the long run, though somewhat less volatile.  Here again, returns are highly uncertain, especially in the short term.  It is possible for prices to fall.

Alternative investments:  There is no type of safe investment that will reliably outdo any of the conventional asset classes listed. There might be a risky investment that offers more, but a safe one?  NO.

[Edit: for example, there are peer to peer lending platforms based in Eastern Europe that offer returns of up to 15%. There’s a reason for that – higher risk. There is no such thing as a free lunch except sugar from the government.]

Someone offering you a ‘safe’ investment that offers significantly higher returns than shares is either (a) misleading you about how risky it is, or (b) taking advantage of your avarice to rip you off. There is no product on this blue Earth that offers a guaranteed 15% return.  Maybe in some alternate universe, but not in ours.

I urge readers to listen to the podcast linked at the endnote about a notorious conman who deceived friends, partners and others for many years, in many countries, with outlandish promises like these.[i]  I hope that understanding how charming and determined he was might help to inoculate you against others like him.  In addition, it is very interesting.

Remember the basics: you can obtain financial freedom by living within your means, saving, and consistently investing over the long run.  Trying to increase your income to generate some extra capital to invest is far more sensible that trying to achieve unrealistic returns.

Don’t be greedy.  Don’t be foolish.


Also available on many other platforms.


  1. Kentucky Gent · October 8

    “how good is ‘too good to be true’?”

    Hmm, finding out the girl in the photo is Catholic, and wants to marry an over-50 Catholic man with 25% body fat – that’s too good to be true.

    Liked by 1 person

  2. Pingback: Friday Finance: SCAMS! | SovietMen

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