They say that risk is equal to reward. They also say that we can’t put all our eggs in one basket. Let’s also not forget that the sages also quipped that we can’t have our cake and eat it too!
So what shall we believe?
The world of investing is one that’s dictated by the man eat man philosophy. Everything from investment fraud to making the wrong investment decisions can destroy your dream of retiring to a mega-mansion every night, to finding yourself hearing the ‘lights out’ announcement in a community shelter a few months down the road!
So why is the investment market so dangerous and rewarding at the same time?
It all boils down to psychological guilt.
When it comes to investing, everyone dictates what one has depending on what they can bring to the table. When the numbers are significant, you automatically become an asset, but when you’re a small fry, guess what, you’re just a stepping stone.
Some Simple Rules to Investing
In fact, the undying rules of investment that you need to be aware of before playing the game is that:
There’s always some risk involved with investment
When it comes to investment, there always has to be an element or research as well as trust
You shouldn’t carry out with an investment without first doing some background research on it
Keeping this in mind, it is essential that you are able to spot all the warning signs of potentially becoming another statistic of investment fraud.
Though it’s harder than it sounds, everything can be simplified by first becoming aware of the red flags of underhand investment tactics. Here are some of the ones that you should be cautious of.
Investment is like chess. It’s a game of chance that you should play with a lot of wits.
Beware Shady Brokerage Tactics
Always keep your guard up if you happen to be working with a broker that is paid by commission. According to a John Csaszar of GOBanking Rates, such a broker is usually not required to put your needs and wants first while negotiating your investment.
Indeed, the fact that some investments rake in more commission as compared to others might warrant him to entice you to an investment of which you might end up paying more only for you to get the short end of the stick.
Moreover, you should be skeptical of the witty marketing tactics that such brokers attempt to use to reel you in.
For example, if they try to amp up the antics by seeming over-excited about a particular investment, you should probably consult the services of an independent financial analyst.
Be especially careful with words such as ‘the next big thing’ and showing you how lucky that you’ve got ‘inside information.’
Encouraging You to Borrow Money Prior to Investing
Even the most amateur of salespeople know that encouraging you to dig into your life savings for an investment is a major warning sign of a scam ahead
A blogger to the Financial Mentor, Mr. Todd Tresidder, states that no legitimate salesperson will ever recommend a new investment opportunity to you without first enquiring about your past risk tolerance and investment opportunities.
Indeed, most conmen are the individuals that skip this step during a sales process.
Additionally, con men will always want to ask about your personal financial details such as your bank account number, credit card numbers, as well as info regarding your retirement account.
Never go all in with your investments. Instead, diversify them
Beware of Investments That You Can’t Cash Out
Liquidity is the process by which you can transform an investment or an asset into cash. Indeed, the likes of bonds and stocks can easily be liquidated while the likes of property can take a while to be liquidated due to their large processing time-frame.
Knowing this, if you see that it will take you quite a long time frame to liquidate your assets, then you should be cautious about this particular investment.
That being said, Tresidder believes that only fixed-term securities agreed in writing before the investment such as liquidity constraints, partnership interests, redemption rights, hedge funds, and CDs can limit your ability to access your cash through liquidity of your assets.
If you find it difficult to liquidate your assets in an investment, then you should think twice about the investment
The Investment Looks Too Complex
Another unspoken rule of investing is that it should be easy. In fact, the whole point of investing is to pump money to a company right? So why would they make it complex?
That being said, if you come across investments’ that use excess jargon and have obscene requirements such a minimum initial investment of $100,000, then you should be wary of it.
