One of the most common reasons why people fall for investment scams is because of the very high returns promised for a very short period of time.
The inspiration of this post is to hopefully give investors out there a quick mental framework on how to think rationally about investment returns and hopefully make them a little better in identifying investments that are plausible vs hoax.
Case in point is one of the Philippine's biggest investment scam w/c reportedly promises 62% return in just 20 days or equivalent to 1,131.5% per year according to PinoyMoneyTalk.com.
Now quoted at 62% for 20 days it might mentally deceive ones brain to accept the very attractive offer. But when you do the math, the numbers will really look funny and on first glance would look nothing but - for lack of a better word, a joke.
Here's why.
Let's assume you were offered that deal 27 years ago and say you had P10,000 back then. How much money would you have now at 1,131.5% return every year? Note that the reason why I have chosen 27 years is because we will compare it later with LEGIT investments that had recorded data going back 27 years.
The answer is:
The inspiration of this post is to hopefully give investors out there a quick mental framework on how to think rationally about investment returns and hopefully make them a little better in identifying investments that are plausible vs hoax.
Case in point is one of the Philippine's biggest investment scam w/c reportedly promises 62% return in just 20 days or equivalent to 1,131.5% per year according to PinoyMoneyTalk.com.
Now quoted at 62% for 20 days it might mentally deceive ones brain to accept the very attractive offer. But when you do the math, the numbers will really look funny and on first glance would look nothing but - for lack of a better word, a joke.
Here's why.
Let's assume you were offered that deal 27 years ago and say you had P10,000 back then. How much money would you have now at 1,131.5% return every year? Note that the reason why I have chosen 27 years is because we will compare it later with LEGIT investments that had recorded data going back 27 years.
The answer is:
