‘Taifa Leo’ recently carried an article on the putative investment
company VIPortal. The Limuru-based company claims to deal in forex and
commodity derivatives and promises a monthly rate of return greater than
80% to prospective clients. On their site, the company claims to be a
forex broker, and the site carries many of the trappings. In fact, they
claim to be an ECN platform (ECN platforms are cutting-edge and it is
simply not plausible that a company operating out of ‘Ushirika House’ in
Limuru could operate an ECN platform).
Well, I do not know anybody who has traded with VIPORTAL so I cannot tell whether they really offer brokerage services- much less whether they truly do have an ECN platform. What has me concerned is their managed accounts: what is known as PAMM. PAMM stands for Percentage Allocation Management Module. In simple terms, when you open a managed account, an expert plays the market using your money, and you split the profits according to a pre-determined ratio. Now, there is nothing inherently suspect about PAMM, but in practice, almost all end in disaster. To be sure, there are many traders who could profitably manage accounts. But here’s the thing: a good trader will not waste his time on PAMM when he could make a lot more money trading for himself. There are many ways to source funds that do not carry the encumbrances that managing numerous small accounts carries. Additionally, all derivatives brokers offer leverage (the ability to borrow the broker’s money against the funds in your margin account).
For this reason, most people behind managed accounts tend to be inexperienced traders with very risky trading strategies. Little wonder, then, that many PAMM accounts fare as they do. Now, the problem with VIPORTAL’s managed accounts is that they may not be managed accounts after all. In fact, given the returns they have been paying out, it is almost certain that the forex brokerage is a front for a Ponzi scheme not unlike ‘Bullish Trade’. ‘Bullish Trade’ was a ponzi scheme posing as a derivatives trading company that scammed thousands of people reaching across several continents in 2013.
A rule of thumb in investing is that any risk-free investment that returns more than a government bond should be scrutinized thoroughly. With one-year notes currently yielding about 10%, VIPortal’s rates of return are in the stratosphere. Even if we assume, for the sake of argument, that VIPortal has traders who could multiply funds that rapidly, there is simply no reason why they should reward their clients so generously. With mutual funds returning 15% a year, it is inconceivable that VIPortal would find it prudent to pay out 80% per month. Such insane rates of return only attract people that want to get rich quickly.
Of course, the forex brokerage smoke screen is part of the reason why VIPortal has been successful. The forex market is widely misunderstood. Many people erroneously assume that forex trading is a money-spinner. But like all forms of financial trading- it is not a money-for-jam practice. It is time-consuming, risky, and terribly difficult. As such, it asks investment in time and effort. Any person or firm that offers a shortcut should be considered highly suspect. As VIPortal’s clients are about to find out, there’s no such thing as a free lunch.
Well, I do not know anybody who has traded with VIPORTAL so I cannot tell whether they really offer brokerage services- much less whether they truly do have an ECN platform. What has me concerned is their managed accounts: what is known as PAMM. PAMM stands for Percentage Allocation Management Module. In simple terms, when you open a managed account, an expert plays the market using your money, and you split the profits according to a pre-determined ratio. Now, there is nothing inherently suspect about PAMM, but in practice, almost all end in disaster. To be sure, there are many traders who could profitably manage accounts. But here’s the thing: a good trader will not waste his time on PAMM when he could make a lot more money trading for himself. There are many ways to source funds that do not carry the encumbrances that managing numerous small accounts carries. Additionally, all derivatives brokers offer leverage (the ability to borrow the broker’s money against the funds in your margin account).
For this reason, most people behind managed accounts tend to be inexperienced traders with very risky trading strategies. Little wonder, then, that many PAMM accounts fare as they do. Now, the problem with VIPORTAL’s managed accounts is that they may not be managed accounts after all. In fact, given the returns they have been paying out, it is almost certain that the forex brokerage is a front for a Ponzi scheme not unlike ‘Bullish Trade’. ‘Bullish Trade’ was a ponzi scheme posing as a derivatives trading company that scammed thousands of people reaching across several continents in 2013.
A rule of thumb in investing is that any risk-free investment that returns more than a government bond should be scrutinized thoroughly. With one-year notes currently yielding about 10%, VIPortal’s rates of return are in the stratosphere. Even if we assume, for the sake of argument, that VIPortal has traders who could multiply funds that rapidly, there is simply no reason why they should reward their clients so generously. With mutual funds returning 15% a year, it is inconceivable that VIPortal would find it prudent to pay out 80% per month. Such insane rates of return only attract people that want to get rich quickly.
Of course, the forex brokerage smoke screen is part of the reason why VIPortal has been successful. The forex market is widely misunderstood. Many people erroneously assume that forex trading is a money-spinner. But like all forms of financial trading- it is not a money-for-jam practice. It is time-consuming, risky, and terribly difficult. As such, it asks investment in time and effort. Any person or firm that offers a shortcut should be considered highly suspect. As VIPortal’s clients are about to find out, there’s no such thing as a free lunch.
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