We're savvy and self-aware—meaning we know it's important to invest. But what about knowing when we shouldn't?
In our article “How to invest in your 20s (Literally)” we gave you the 411 on different forms of investments you can make with your hard-earned paycheck. Now that you’re considering, we want to summarize some red flags you should watch out for. If you spot any of these five signs, the time (or investing offer) probably isn’t right.
1. IF IT’S TOO GOOD TO BE TRUE, I MEAN…
We’ve heard this saying over and over again. Whether we’re talking about men, merchandise, or money, it’s the same thing. If you’re promised huge payouts for a small investment, it’s probably a scam. Don’t allow yourself to be swayed with smooth talk about high earnings, zero fees, a small investment, etc. The investment world simply doesn’t work that way.
2. IF THEY TELL YOU THERE ARE NO RISKS INVOLVED, SKIP IT
Remember we said that all investment options have different risks attached, so if you’re approached by someone who is offering you a chance to invest “risk-free,” keep moving. Simply put: no investment is ever completely risk free.
If you find you’re unable to understand an investment, you probably should pass on it.
3. IF YOU DON’T UNDERSTAND THE INVESTMENT BECAUSE IT’S JUST TOO COMPLEX, DON’T GET INVOLVED
Financial advisors and investment professionals should be able to explain the investment process along with the structure of any investment product they offer you. If you find you’re unable to understand an investment, and the “professional” isn’t able to answer your questions eloquently, you probably should pass on it. You should always understand at least the basics of any investment package you bring into your portfolio.
4. IF YOU’RE ASKED TO SEND MONEY RIGHT AWAY, RUN THE OTHER WAY
It’s great to put feelers out about investments that interest you and you should feel comfortable emailing or calling about potential opportunities. If in their reply, though, the solicitor explains that if you don’t send your money now you’ll miss out on a great opportunity, you’re deep in scam territory. In the professional world, you should be able to ask questions about the investment, read documents concerning the investment, and meet with the solicitor or “investment professional” before any money exchanges hands. Anyone who asks you to send money right away is someone whom you should be wary about. Run the other way, Contessa!
5. IF YOU HAVE TO REFER OTHER PEOPLE IN ORDER TO MAKE MONEY, REFER YOURSELF TO ANOTHER OPTION
Lately, my friends and I have been receiving text messages from other friends who are seemingly letting us in on an investment secret. They often invite us to invite-only meetings and tell us about a great investment opportunity that they’re letting us in on. You’ve probably heard of “triangle schemes” and they’re still rampant, unfortunately. At times, they can also be latent, meaning close friends might get sucked in. Be wary of these “invitation only” meetings where you must refer others to earn on your investment. While it could be legitimate, it could also be an illegal scheme. Better to skip it.
BONUS: TRUST YOUR GUT (INTUITION IS REAL)
While this tip is not conventional, I believe in that feeling we get in our stomach when something isn’t right. If you get this feeling, trust this feeling and take professional advice. By the way, you should be seeking professional advice before investing anyway, remember?
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