Let us say a potential investor is offered '100% guaranteed returns' if he invests in this or that scheme. There are two aspects to this. One is the number; 100% return is certainly bound to catch his fancy. You may think, oh so I can double money in 1 year. That sounds so attractive. Don’t fall for such games because returns on your equity investment are not about doubling your money in 1 month or even in one year. At times it happens but that is just a windfall and you must not give to importance to that. In equity markets, there is simply no assurance. In fact, if any broker or fund even indirectly hints at assured returns then it is illegal.
But here we would like to focus on the other part that becomes equally hard to resist; the promise of a 'guaranteed' return. Why is that? Let's face it. Nobody likes to suffer losses in any aspect of one's life. And when it comes to money and investments, losses become particularly hard to bear. For many investors, losing money on a single stock causes much heartache. This is even when many other stocks in their portfolios have generated quite handsome returns.
Hence, for the lure of 'guaranteed' returns sets their eyes glittering. But the truth is that such guaranteed returns are hardly guaranteed. It is just one salesman trying to. Sell you the wrong products by offering these carrots. Certainly not in the field of stock investing. For here, what matters really is the 'approach' to investing. This means that zeroing on fundamentally strong companies having businesses that you can understand, healthy financial track record and a sound management. Moreover, these businesses have to be bought at the right price.
IN the past, investors made huge losses only because they went for assured returns schemes. Remember cooperative banks, Anubhav Teak plantations etc. These were all schemes that assured returns but also defaulted on the principal