A:

To answer your question in a word: No! Although we wish such a phenomenal investment system were real, the claims you speak of are preposterous. Most "gurus" are nothing more than salespeople trying to push a product that, despite what they say, does not work.

Anyone promising annual returns of more than 400% is one of two things: dishonest or extremely dumb. If these people truly had such a great system, do you think they would waste their time trying to sell it for four measly payments of $24.99?

Let's do some quick math. Say you had this secret formula and invested $1,000 into it. If it returned 400% for five years in a row, you would have $1,024,000 (through the magic of compounding). Before long, you'd be on Forbes' billionaire list, along with true market guru Warren Buffett. Clearly, anyone with a foolproof system providing such astronomical returns would not need to put on seminars or sell books for what would be pocket change.

The truth is that many systems out there base their historical performance on backtesting. In other words, they test obscure strategies on historical data, and then use the theoretical returns in their marketing copy. Other swindlers trying to sell you something may report short-term gains as annualized gains. For example, they may have made 25% in a stock over four weeks which, sustained over a whole year, is an annualized gain of roughly 325%. But the chances of anyone being able to maintain 25% returns every four weeks over several years are pretty much nil.

Like anything we try to learn, investing doesn't work by cutting corners. Remember that the power of compounding is most effective over the long term. And, as the old saying goes, if something sounds too good to be true, chances are, it is.

RELATED FAQS
  1. What is the difference between a company's annual return and its annualized return?

    Understand the importance of calculating a company's annual return and its annualized return, and learn the differences between ... Read Answer >>
Related Articles
  1. Investing

    Thoughts for Those Investing Over the Next 10 Years

    Review your financial plan with lower assumptions to prepare for the worst in the next 10 years.
  2. Investing

    Stocks Are No.1

    Historically, stocks provide the highest returns - but only under certain conditions.
  3. Investing

    Why Your Investment Growth Calculator May Be Wrong

    Many simple investment growth calculators fall short, so here's one you should use instead.
  4. Trading

    Trading Systems: Run With The Herd Or Be A Lone Wolf?

    Find out if taking the path less traveled will work in your favor - or against it.
  5. Investing

    Calculating Annualized Total Return

    The annualized total return is the average return of an investment each year over a given time period.
  6. Trading

    Top 4 Things Successful Forex Traders Do

    By blending good analysis with effective implementation, you can dramatically improve your profits in this market.
  7. Investing

    How To Avoid Common Investing Problems

    Learn to overcome eight hurdles that can keep you from realizing the best returns.
RELATED TERMS
  1. Compound Return

    The rate of return, usually expressed as a percentage, that represents ...
  2. Annual Return

    The return an investment provides over a period of time, expressed ...
  3. Annualize

    1. To convert a rate of any length into a rate that reflects ...
  4. Effective Annual Interest Rate

    Effective Annual Interest Rate is an investment's annual rate ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal ...
  6. Historical Returns

    The past performance of a security or index. Analysts review ...
Hot Definitions
  1. Five Cs Of Credit

    A method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics ...
  2. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  3. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  4. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  5. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
Trading Center