Stanford Financial Group investing lesson

February 18, 6:14 AMSeattle Personal Finance ExaminerSteve Juetten, CFP®

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In an earlier post, I noted what investors can learn from the Bernie Madoff investor fraud case. Yesterday, Stanford Financial Group provided us with another investment lesson. The Securities and Exchange Commission (SEC) has taken over control of Stanford because of “improbable, if not impossible” rates of return the Company promised it would pay for non-insured certificates of deposit (CDs).

For example, Stanford recently offered rates of more than 10 percent on five-year CD’s. According to Bankrate.com, the national average for five year CDs is about 2.8%. In Seattle, the best five year non-jumbo CD rate listed is 3.50% at Wells Fargo Bank. According to the SEC, Stanford has issued over $8 billion in suspect high-yielding CDs.

The SEC doesn't believe Stanford has the assets to pay those ridiculously high rates of interest it promised investors so it took over the bank to protect investors. We'll see how it works out. For now, the first investing lesson from Standford Financial is if it seems too good to be true, it probably is.