Recently, a viral tweet put scores of Twitter users in serious debt to mobile telecommunications operator – MTN. A random Twitter user @vibes_N put out a tweet for “MTN users to quickly dial *6060*1# to get 30gig!!!”
Dozens of users patronized the tweet only to meet their misfortune. In their attempts to enjoy free data, they ended up activating a service that borrows airtime from MTN with the double whammy of a service charge for their “misadventure.”
Apparently, the few that survived this prank had a sufficient amount of airtime so MTN prompted them that they are overqualified for “airtime advance.”
The rest who were unfortunate came back to lay curses on the Twitter prankster who should have broken the record for most curses received in a day if Guinness Book of Records tracks these sorts of records.
The prank has been posted to different social media platforms such as WhatsApp and is still spreading as of the time of this writing.
How did people fall for this?
The same way people fall for Ponzi schemes! The desire for freebies and unrealistic rewards for minimal efforts put lots of people in trouble daily.
In the defense of Nigerians, they are tenants of the poverty capital of the world suffering from double-digit inflation and rising costs of living that are disproportionate to their wages.
To survive, they hunt for “awoof” (a street term used to describe freebies) and end up falling prey to online scams and schemes.
Over the past few weeks, Nairametrics has run different columns and articles educating Nigerians on how to detect, spot, and avoid Ponzi schemes.
In my own way, I want to write on how to differentiate fake and real investments offerings.
The desire to make quick money is valid. Everyone loves a quick buck. Money might not buy happiness but it can buy you a nice house, a nice car, and pay for a nice vacation in the Cayman Islands.
But the glamour of quick money leads people to fall for Ponzi schemes like MMM when they can find safer ways to make, manage and multiply money (MMM).
Investment offerings come in different forms. Real estate, Cryptocurrency investments, Forex trading investments, and marketing amongst other means.
There are different asset classes and returns on all of them are never guaranteed – just a few at the lower end of the risk to reward ladder such as Treasury Bills.
The lower the risk, the lower the returns, and the higher the risk, the higher the probability of high returns. Keyword – probability.
Looking at recent Nigerian data, Treasury Bills, Bonds, and Eurobond yields are currently at 5.45%, 11.75%, and 6.49% respectively.
Inflation is ranging at 17% which means any investments in the above instruments would result in what we know as Negative real yields and Negative real returns after the investment period.
So Nigerians climb higher on the risk ladder in the search of higher returns.
The problem is that as they embark on this journey they are less educated on the financial products they might encounter.
The complexity and longevity in investing in stocks and mutual funds which historically offer decent returns in the long-term are not attractive for the common investor.
The S&P 500 which is a benchmark of the American stock market performance, has returned a historic annualized average return of around 10% returns.
So how can unlicensed ‘Addy FX’ offer you a guaranteed 15-20% return per month consistently?
The stress in researching investment products, word-of-mouth referrals, and the hugely promising and “guaranteed” returns are the key ingredients Ponzi schemers use.
Now add a bullish cryptocurrency market to the mix. FOMO (Fear of missing out) has pushed people to invest in “crypto scams and crypto projects.”
There’s no superior difference in “investing and trading” than the average person and the head of a Ponzi scheme. The truth is as one becomes more experienced with trading and investing – ethics prevent oneself from promising unsustainable returns to innocent people.
So throw more questions at people luring you to invest your money into their products. Do LinkedIn searches on founders and SEC searches on their investment companies. If you are unsure, contact a financial professional for due diligence and advice.
There are many safe platforms to invest in and do it yourself. Investing by yourself will outperform any Ponzi return in the long run.
Dollar-Cost averaging (Process of buying assets periodically to ride out volatility) and lump-sum investing (setting cash asides and holding for a long time) is still the way to go.
Returns are arbitrary. Financial markets are irrational. Past performances are not indicators of future returns.
One of the funniest questions I face every day is “What can I invest xx amount and get 50% returns in 6 months?”
My favourite reply is “If I knew the answer to that, I’ll sell all my properties, invest it and wait for 6 months for my pot of gold.”
There are occasions where people can make 10x, 50x on investments or trading. It could be random. If you were in a selling position on crude oil on March 8, 2020, you would have made a quick buck. If you took a risk and bought “shitcoins” Dogecoin, Shiba Inu, or meme stocks Gamestop and AMC – you would have enjoyed some profit.
Some investors prefer to expose a small percentage of their portfolio to risky assets like the above. This makes more practical sense than to trust your life savings or rent to some “imaginary” global holdings.
To conclude, professional investors will not advertise their products with corny quotes such as “Enjoy guaranteed financial freedom while you are sleeping” or “Generational wealth started because one family member took a risk.”
Please, don’t lose your life savings because of motivational speakers-cum-sham investors.