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How to spot a bad investment opportunity from a mile away

Two weeks ago, I went on a book tour to Abuja and Port-Harcourt in Nigeria

I absolutely enjoyed connecting with people at my book signing events.

More importantly, I got to listen to quite a number of people share bad investment experiences with me

Some of these stories were shocking and the others, simply unbelievable

Someone shared how he borrowed money to invest in a promising network opportunity and lost it all.

Now he’s in debt.

Another shared how she got involved in a real estate project and got her friends involved as well, only to lose over $25,000 after a few months

I found these stories really sad and annoying too

Before I delve into how to avoid making bad investment decisions,  I need to start with this caution, don’t be greedy for sky rocket investment returns

The truth is no one sets out to make a bad investment decision. We are usually simply lured by the promise of a high Return on Investment (ROI)

The promise of a high ROI makes a lot of people throw caution into the air.

We hear about an opportunity to make 1000% return on investment and we dive into it without asking some key questions.

Trust me, If it sounds too good to be true, it probably is

Here are some red flags that will help you recognize investment scams as  I choose to call them.

Red flag #1 – You don’t understand how the investment earns profit

When you review an investment opportunity, there should be a clear path from when you invest your money to use of the funds by the business and eventually to profit.

If there isn’t, that’s a red flag

You should ask questions such as; What does the business do? What industry does it operate in?

Is the business directly involved in creating value or providing a solution or are they merely intermediaries? Do they do too many things? Does the business require constant recruitment of new members?

The answers to these questions will demonstrate if it is a good investment opportunity or not. If  you’re not comfortable to the answers to these questions, run!

When a business invests in apples, cryptocurrency and everything else, there’s definitely something fishy about that business. What’s the relationship between apples and cryptocurrency?

Some businesses take advantage of technology to make it convenient for anyone to invest but they are fundamentally still businesses. For instance, there has been an increase in the number of crowd funding and peer-to-peer lending platforms in Africa.

While these platforms take advantage of technology to make it convenient for investors like us to invest in industries like agriculture, they are fundamentally not ‘Tech’ businesses. As a result, they are still exposed to changes and risks in the industry they operate in.

 

Red flag #2 – You don’t know anybody else that has invested in that business

Ask a few people in your circles about the investment opportunities that come up on your radar. They might know a thing or two about it. If some of these people have invested and made their money back, it might not be a bad idea to invest as well

But fundamentally, it also depends on the type of friends in your circle. If those in your circle invest in Ponzi schemes, maybe you need to change your circle of friends.

Run away from Ponzi schemes. They eventually go bust.

 

Red flag #3 – They give you a short deadline to invest

This is also a common red flag. They don’t want you to ponder on the opportunity for too long, lest you spot the issues so they ask you to pay in less than 24hrs or lose some benefit.

Be careful about making quick investment decisions. Take your time to ask questions and be satisfied with the answers you get to your questions. Share the opportunity with a few trusted friends and get their feedback as well.

If the deadline to invest elapses before you make a decision, You can observe the organization over that period  and invest once that opportunity is available again

At the end of the day, it all boils down to the decisions we make.

Our investment decisions can move us closer or further away from our goals.

When in doubt, get an education.

Sometimes, after painstakingly carrying out all the checks, an investment might still go bad.

That’s the risk associated with some investment options , however some risks are not necessary especially when the tell tale signs stare you in the face.

Stay woke.

 

 

 

 

 

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