Viewer Question of the Week

An advisory firm has told me they can help me earn a minimum return of 1 percent per month on a $100,000 investment. As I understand it, they borrow four times the amount you invest to buy blocks of bonds and then somehow simultaneously sell smaller blocks of those bonds.

I've heard that in some months, they have paid out an 8% return. I've been told this company is backed by a very reputable major investment firm and that your money is escrowed so that you can't lose it. Do you think this is a legitimate investment opportunity or a scam?

-Vicki, Buffalo, Minn.

Answer: Based on what you've told me, it could very well be a scam, that is, a Ponzi scheme or other ploy designed solely to separate you from your money. But it's also possible that it could also be a perfectly legal investment that comes with latent fees or a zillion strings attached that make it virtually impossible for you to collect those enticing returns.

Either way, I think you should just avoid it, as well as anything else this firm is peddling and, for that matter, any other investments pitched in a similar way.

Why? Well, this just doesn't pass what I call the "sniff test." It just smells bad. In fact, the "investment" you've described has three of the classic malodorous elements that are common to outright flim flams and dubious, though legal, investments that promise more than they'll actually deliver.

"It stinks, and you shouldn't step in it. Getting it out of your shoes will be next to impossible."

-GG, circa 1990