I want to continue discussing the topic of “How To Protect Yourself From Financial Fraudsters” and today I will share two additional thoughts.
The first is when an investment is Overly complicated: Successful investing should be simple to understand. This is true for folks who are just starting out and for multibillionaires. This may sound counterintuitive, especially for folks who have developed a meaningful level of financial and professional success, but it’s the truth. A plain vanilla portfolio filled with stocks, bonds, and cash is all that anyone needs to achieve their financial goals. If you don’t understand what is being pitched to you, trust your gut and walk away. It’s not that you’re not smart enough to understand it. It’s more likely that the other party is selling you a bogus strategy that won’t work out. Complexity sells, but to quote Leonardo Da Vinci: “Simplicity is the ultimate sophistication.”
The next area to look out for is a Great deal: I can’t count how many people have lost money on a “deal” they got access to by some benevolent friend or family member. Participating in an investment because it’s the deal of the century is usually a bad decision. An investment should be pitched on fundamentals and an understanding of how you will make money, not because you have access to something that others don’t have.
Without fail, every month clients will reach out to me to discuss an opportunity they have through a “friends and family discount.” The scenario is usually that their buddy from a past life, a macher in shul, or a guy that your brother-in-law knows, is raising money for a real estate project in mid-America. They were given the “opportunity” to participate with the same terms as the organizer’s friends and family. Wow! What an opportunity! Right? Wrong! The end of this story is usually the same. They either never get their money back or the return is substantially less than what was originally pitched to them.
Do yourself a favor and don’t go after the latest deal. It will just lead to frustration, heartache, and the loss of funds.