risk
If it promises safety, read incentive
The rule
A safe-looking promise often hides one question: who takes the risk, who is paid upfront, and who bears the loss later.
Where it flips
Some registered fixed-income products really do have promised cash flows. Where it misleads: you suspect everything. The fix is not blanket suspicion; it is four checks: source, registration, risk, and recourse.
Scams rarely sell honest uncertainty. They sell certainty, urgency, "everyone is doing it," or official-sounding words. The reader should start elsewhere: who gains here, and is this product and seller actually registered? Read the incentive first.
A worked example
A fixed, high monthly return, with no clear registered product, no audited source of the money, and no stated loss path, should be treated as a risk question first, not a return question. [illustrative]
How to spot it
- ·a promised return
- ·a rush to act now
- ·a reward for bringing in others
- ·no registered middleman
- ·no clear path for how you could lose
Howard Marks · risk memos