5 warning signs of risky investment 'opportunity' | UAM

27th Jul 2019

We have $10,000 waiting for you

Ever received an investment opportunity that feels too good to be true?

Well, that’s probably because it is!
Similarly, not all investments are created equal; there are the good, the bad, and the ugly…

The challenge for investors is being able to decide what information can be trusted and what is simply “too good to be true”.

Here are some warning signs to look for:

1. Limited investment opportunities

An offer so good there are only limited stocks available for purchase, and you need to invest a considerable sum as a minimum purchase.
If your financial adviser tries to promote stock sales without first understanding your personal goals and financial objectives, this is a big warning sign that the investment proposed is about them making sales rather than you making an investment.

2. Incredible returns

The idea of investment is to attempt to generate good returns, but past performance does not, and cannot, guarantee future success. If it were that straightforward to propose a 40-fold return on investments, then everyone would be doing it
Claims of an unbelievable return, coupled with a ‘buy now before it’s gone’ sales pitch, is begging you to question the investment. Would a responsible adviser put time pressure on your investment?

3. Celebrity endorsements

If you’re being encouraged to invest because wealthy Silicon Valley investors have done the same, warning bells should sound. Elon Musk and company have invested in some great ventures, but they have also lost millions.
When investing a significant sum in one company rather than a diversified portfolio, you become exposed to higher risk. Yes, you may reap higher returns, but your investment could also vanish. Inc.com recently published an article stating 96% of businesses fail within the first ten years.

4. Limited information about the company, stock, or investment

Reputable investments have vast amounts of information available about them, and historical data to back up their credibility. Conversely, Start-ups or ‘the next big thing’ are more likely to be ‘the next big fail’.
If putting your money into these types of extremely high risk ‘investments’ is your thing, you may as well have some fun at the local casino instead as your chances of receiving the offered returns are a high-risk gamble with little prospect of winning.

5. Gut feeling

When it comes down to it, we all have the instinct to determine how legitimate something sounds, but it’s easy to get swept away with slick sales pitches and the prospect of easy money.
Keep your wits about you, get references, do your research, gather your evidence, and check the credibility of proposed investments.
Financial advisers should have your best interests at heart. If it feels like they’re just trying to sell you something you don’t need, walk away.

Okay, so the bad and the ugly elements of the investment world may not be as easy to spot as a phone call saying you have $86,000 Ugandan Dollars waiting for you. When you take financial advice, it’s important you feel you can trust your source.

One of the best ways of doing this is to check with others in your industry or friends and family to see what their experiences have been.

We leave you with Fonejacker and his banking opportunity…

If you would like to talk to us about your financial goals and what investment opportunities are suitable for you and your circumstances please get in touch.


Tom Vjestica