A promise of high returns is the warning sign
He promised 48% a year.
Warren Buffett, the richest man in the world from investing, averaged 20% a year over 60 years.
So either this man is twice as good as Buffett, or he is lying.
Nobody on earth dares promise a specific number
Mekong Capital manages hundreds of millions of dollars in Vietnam, with good years and bad years. VinaCapital is the same. Peter Lynch, who produced 29% a year for 13 straight years, a record almost nobody has matched, never promised a number for the year ahead.
That is not modesty. It is what investing actually is.
Markets do not run on a calendar. Returns do not arrive evenly like bank interest. Anyone who understands this cannot, and will not, promise a specific figure for next year.
So when someone does promise, there are only two possibilities: they do not understand investing, or they are lying. In both cases your money is unsafe.
1,279 billion dong, and a lesson that is not new
The former chairman of My Hanh Company sketched out a Ngoc Linh ginseng project. Promised 48% a year. Flew more than 1,200 investors on trips to build confidence. Then used the later money to pay the earlier money.
This is a Ponzi scheme. Not new, not complicated. It has been around since the twentieth century and still works for one simple reason: greed and the fear of missing out are stronger than analytical thinking.
The trips, the lavish gatherings, the story about rare Ngoc Linh ginseng, all of it is marketing spend. Every dong spent building confidence came out of earlier investors' money.
1,200 people. 1,279 billion dong. More than a billion lost per person on average. They were not stupid. Most had assets and education. They were defrauded because the system was designed to get past ordinary good sense.
Why intelligent people still fall for it
There is a paradox here: Ponzi schemes work best on people who have money and want to protect it.
People with little money do not get invited. The model needs someone with enough money to put in, and enough fear not to ask too many questions.
When the introduction comes through a trusted acquaintance, when you see others already in and "receiving their returns on schedule", when you are taken to visit the site, the brain shifts from analysis mode to social mode. The question "what is the mechanism that generates this return?" gets replaced by "what reason would the person who introduced me have to cheat me?"
Ngoc Linh ginseng is real. A ginseng-farming project could be real. Only the 48% a year cannot be real, and that is the one thing almost nobody stops to ask about directly.
A simple filter I use
Whenever someone invites me into an investment, I ask one question: "Which year was your worst, and how much did you lose?"
If they have no answer, meaning they have never lost money, that is the first reason to walk away.
Not because losing is good. Because any real investment model goes through bad years. Markets are cyclical. Businesses carry risk. Someone who says they have never lost is either lying or has not been around long enough for the market to test them.
Buffett lost money in 2008. Mekong Capital has lost money. VinaCapital has lost money. Peter Lynch had plenty of losing quarters. That is the evidence they are playing the real game, not the one where later money pays earlier money.
What I chose to do differently
I was once invited into an agricultural project promising 36% a year: a good story, a credible introducer, a real site they were happy to show me.
I asked for the last three years of financial statements.
The answer was: "The project has just started, so there are no statements yet, but the model has been proven elsewhere."
I passed. Not because I was sure it was a fraud, but because there was no data to analyse, and with no data, the margin of safety is zero.
A year later I heard the project had stopped operating and investors were in litigation.
The simplest rule in investing
Returns above the bank's are possible, but they come with risk above the bank's, and nobody can guarantee them in advance.
When someone promises a specific number above the deposit rate, whether 20%, 30% or 48%, and says nothing about risk, that is not an investment opportunity. It is a psychological mistake waiting to happen.
The rule is simple: a return promised in advance equals a risk left unmentioned.
And the unmentioned risk is usually bigger than any number they promised.
The question is not "is 48% real?" It is "why do they need me in order to make 48%?"
Silent discipline. Compound value.