@AmandaSteinberg of DailyWorth writes about some of the lessons learned from the Bernie Madoff ponzi scheme, which is featured in the new docudrama from HBO, The Wizard of Lies. Many of the “take aways” apply to all investing, not just private fund investing.
- Understand what you are investing in. Ask questions, do research, follow up.
- Ensure that independent parties are involved with the investment. It is more difficult for an investment sponsor or advisor to commit a fraud if there are multiple parties who must sign on to the lie.
- If an investment sounds too good to be true, it probably is. Track the sources of “alpha” to understand why an investment is better than an index-oriented strategy.