How To Spot A Potentially Bad Financial Investment [Part 1]

There are many people that have fallen victims of wrong investments in the past which have affected their finances negatively. A lot of these investments had warning signs which many of them simply ignored or knew nothing about. More often than not, bad investments do not just suddenly turn bad, there are certain signs at the onset that would normally point people to it. Here, we shall take the part one of the signs to look out for in order to spot a potentially bad investment so that you will stay clear of it.

_{Image from Pixabay}

1. If an investment is not clearly understandable

There are some investments that, no matter how you try to explain it in plain English, it will still look very complicated and complex. A similar investment opportunity was launched earlier this year in the country, which they claimed was a betting investment. There is nothing wrong with investing in football betting, but the very scheme that the platform came up with was "reverse betting". That is, claiming to reward people for predicting wrongly. Which means, you win by losing your prediction. Complex right? This also means that no one would lose because all you needed to do was to predict wrongly to win.

Now the question of where they hoped to get the funds to sustain those that they are meant to pay became glaring and I came to realise that they were depending on the people coming in to pay for those already in the investment (a typical nature of ponzi scheme). Well, it was not long and the investment bounced with people's money. These scammy people, sometimes, make the business look so complex to make it appear unique and original. Just to let you know, that an investment look complex and complicated does not mean that it is better than the one that is simply to understand and explainable in plain terms. Be wise.

2. When an investment looks too good

This is where many people are being scammed because these scammers simply feed on the greed of their victims by presenting them with an offer that is literally "mind-blowing." Imagine a business giving you an outrageously high ROI and you are happy to invest in it. Actually, you should be scared because that investment is like sitting on a ticking time bomb which would go off soon. I mean, have you asked yourself where they get the money to be able to pay you that kind of ROI or how long they can sustain it?

If an investment opportunity begins to appear too good to be true, then you should tread with caution because it may not be that good or it may just be a camouflage to scam you of your funds. There is a rule of thumb that I have used as a guide in terms of investment: if an investment opportunity promises you a return that far supersedes the bond interest rate of your respective country, then you should see it as a warning flag. This is because, no sustainable business that has a long-term future plan will promise you that kind of returns, obviously it will harm the future of the business as they will run out of funds. More so, they are not even guaranteed of making as much profit as they want to pay you as interest. So be wise.

_{Image from Pixabay}

3. Lack of communication and transparency

One of the first signs of a potentially scammy investment is that they will not give out the contact details of anyone that you can hold accountable in case of any eventuality. In the scenario I used for example in the first point, that same business, when they launched, did not have any direct link to any of the supposed team members. Even when you click in the "about page" of their website, it will redirect you to an online form where you will put in your details and the questions you want to ask. So now, who do you hold accountable in the case of losses? To even make it difficult to trace, the registration fees were paid with digital currencies so you cannot pick details from any bank account.

If an investment platform lacks the required transparency and communication, then it should give you a red flag. It is your money that you are investing, so you should know where the money is going into. You will agree with me that the first thing that a company should do to their inventors in the case of any financial challenge is to maintain communication with them while working to get it solved. So if communication is avoided, then it should point to the fact that something shady is happening or about to happen. So be wise.

Thanks for reading