Not surprising that crowdfunding schemes turned sour

The recent reports on crowdfunding schemes that failed to deliver should serve as a wake-up call for all investors ("Investors cry foul over builder's crowdfunding"; June 11, and "Another crowdfunding scheme goes sour"; last Saturday).

Few should be surprised; investment portfolio theory makes it clear that investments with the potential for high returns necessarily come with high risks.

One of the schemes promised annual returns of up to 24 per cent.

This is too good to be true, considering that data from California-based Index Fund Advisers has shown that no asset class managed to generate a long-term average return of even 20 per cent a year.

The Monetary Authority of Singapore has also said that two of the firms concerned were neither licensed nor regulated.

These raise the risk profile of the investments.

It seems that work is still needed on investment safeguards and investment education for Singaporeans.

The authorities should consider more initiatives, such as holding talks by investment professionals at community clubs.

Woon Wee Min

A version of this article appeared in the print edition of The Straits Times on June 21, 2016, with the headline 'Not surprising that crowdfunding schemes turned sour'. Print Edition | Subscribe