The recent case of Bernie Madoff, former chairman of NASDAQ, accused of running the biggest Ponzi scheme in history, has no doubt, sent tremors throughout the financial markets. The sheer enormity of the scam, to the tune of USD$50 billion, is mind-boggling.

How did wealthy, sophisticated, individuals, professionals in their own right, and occupying prominent positions in the highest echelons of society succumb to such duplicity?

The single, overriding factor that made Madoff's investment vehicles attractive was the metronomic uniformity in their performance. One of his funds, Fairfield Sentry Ltd., reported annual returns of between 8 percent and 18 percent every single year. Now we know it was all a facade. The US government says Madoff was paying off early investors with the funds incoming from later investors.

Were investors seduced by the smoothness and symmetry of these returns? No doubt they were. But aren't such consistent returns what equity investors should be looking for?

I beg to differ. I would argue that investors in equity securities place too high a premium on such predictable, recurring returns, with apparent low volatility. Investors who esteem such rhythmic returns are better off buying Treasuries or other fixed income instruments, that carry much less risk, albeit with a lower, fixed rate of return. Expecting such steady, regular returns from equity securities is unrealistic. Investors in Madoff's funds, discovered to their chagrin, that such misplaced expectations, led to the evisceration of their life savings.

Warren Buffett, one of the world's most successful investors, wrote in a 1996 report, "I would much rather earn a lumpy 15 percent over time than a smooth 12 percent. "What matters most, in my judgment, is the compound average annual return achieved over a prolonged period-- say, five or 10 years. Buffett's Berkshire Hathaway for example, had returns of 35 percent in 1997, 52 percent in 1998, a loss of 20 percent in 1999, a gain of 27 percent in 2000 and a gain of 6 percent in 2001. The compound annual return for those five years was 17 percent.

Another fund manager of noteworthy mention is Ken Heebner, whose CGM Focus fund, was down 49 percent in 2008 but up 79 percent in 2007 and 66 percent in 2003. In spite of the checkered trajectory, his fund returned a compound average of 26 percent per year before taxes in the 10 years through 2007.

The best returns, on a multiyear basis, come from investment managers who make bold, often contrarian decisions that run counter to the conventional wisdom of the day. As Buffett again has said "Be greedy when others are fearful, and fearful when others are greedy." Managers who ascribe to such doctrines rarely have even, predictable annual results. Other managers that I have admired over the years, such as John Templeton, Prem Watsa, Michael Steinhardt and John Neff, also experienced considerable variation in their annual returns.

While individual investors in Singapore have not been directly impacted by Madoff's scam, are they nevertheless have lost good money, lured by high coupon payout products as in the case of Lehman Mini-bonds and DBS High Notes. Many of these investors, who are well-educated and savvy (not just the simple less educated novices) - have succumbed to the "attractiveness" of such investment offerings put forward to them by over- zealous financial institutions of fine standing including national banks! The lessons that can be learned from both fiascos are not dissimilar.

Always remember this -- the higher the payout, the higher the risk involved - and indeed sometimes deadly - going by the reports of suicides of well-known billionaires in the newspapers who lost millions. So in this Lunar New Year of the Earth Ox - Be wary of getting fast and high returns. In imbuing the Ox spirit of hard work and patience, financial success will surely come. Have your feet firmly on the Ground (or shall we say Earth)!