"Guaranteed Returns": Why No Real Investment Promises Them
"10% a week, guaranteed." Why higher returns always come with higher risk, why 'guaranteed' is a red flag, and how to compare a pitch with realistic returns.
"Double your money in 30 days." "Earn 2% a day, guaranteed." "Zero risk." These phrases appear in almost every investment scam, because they speak to what everyone wants: good returns without worry. Real investments cannot promise that.
Risk and return, plainly
- Low risk products, such as regulated savings, pay modest returns.
- Higher potential returns, such as shares, come with the chance of losing money.
- Nothing legitimately offers high returns with no risk.
What "guaranteed" usually means in a scam
- Returns paid from new investors' money. See Ponzi schemes.
- A balance on a fake platform that only grows on screen. See fake exchanges.
- Fees to withdraw "guaranteed" profits. See withdrawal fee scams.
Quick checks
- Compare the promised return with regulated savings rates where you live.
- Ask what exactly generates the return, and check it independently.
- Check the firm with a regulator. See checking an investment licence.
- Talk to someone you trust before investing.
"Guaranteed" plus "high" is the clearest warning sign in investing.
For more, see investment scams.
Frequently asked questions
Are any returns guaranteed?
Some savings products and government bonds offer fixed interest, but at modest rates set by banks or governments, and they are regulated. High guaranteed returns are a warning sign.
Why is risk linked to return?
Investors demand more return for taking more risk. An investment offering high returns with no risk contradicts how markets work.
What should I compare a pitch with?
Current savings rates from regulated banks in your country. If a pitch is many times higher, ask why.
Sources
- Investment Scams, US Federal Trade Commission
- Ponzi Scheme, Investor.gov (US SEC)
- ScamSmart, UK Financial Conduct Authority
