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BW Businessworld

Fraud-Proofing Your Money

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If you are a high net worth individual stung by unscrupulous financial practices, this book is right up your alley. Written by Ken Fisher along with Lara Hoffmen, How To Smell A Rat is a good handbook about "fraud-proofing" your investments. According to Fisher, it is important to understand what kind of an investor one is. So, if you are a "Confident Clarke", you are a serious DIY (do-it-yourself) investor. On the other hand, if you are "Daunted Dave", you will not be confident investing without professional help, and that is where you may be asking for trouble.

So how can you smell a rat? Simple: know how the cons operate. You have to be able to cut through the window dressing. Because that is what cons do; they dress up as chief decision-makers and convince you to give them control over your assets. Fisher pins them down the five signs: your advisor also has custody of your assets; returns are consistently great; the Investment strategy is not understandable; your advisor promotes benefits such as exclusivity that do not impact results; you did not do your own due diligence, but a trusted intermediary did.

The book goes on to show how big-time con artists such as Bernie Madoff and Charles Ponzi fooled people. These insider details, coupled with the fully referenced data and finer points of practical investing, keep the pace of the book moving. Ken's succinct narrative shows his 37 years of money-managing experience and leaves the reader with a good amount of food for thought. A word of caution: this book does not offer quick fixes for financial missteps. Rather this is a beginner's guide for someone who has just acquired a debit card or fund managers handling large corporate accounts. That said, none can predict the way the market will swing.

(This story was published in Businessworld Issue Dated 28-03-2011)