Most people turn to investment for wealth creation. But sometimes, things don’t turn out to be the way they want to. Their investments don’t pay off like they expected them to. As an investor, you should always be aware of what a bad investment is. In this guide, Fred Auzenne takes you through a few signs that can help you find out all about a bad investment.
What Makes a Bad Investment by Fred Auzenne
Here are a few red flags of a bad investment that you should always be on the lookout for.
1. Promises of Exceptionally High Returns
As an investor, it might seem very lucrative to you to go for something that pays you exceptionally well in the short run. But remember, promises of a very high return should always make you question why that is the case. It can be a sign of a scam. You need to research to find out what this is all about.
2. Unregistered Sellers or Products
When investing, always go for registered sellers or products to avoid any scams that can make you lose money. It is completely up to you to reduce the risk involved when investing. There is some risk that will always be there, but by performing certain background checks, you can minimize that risk as much as possible.
3. The Financial Advisor Gets a Big Commission
In most cases, the financial advisor gets a certain commission. But if they get a very high amount for every transaction, that should tell you there might be something wrong here. Fred Auzenne says you must first understand that your financial advisors’ interests might conflict with yours in many situations. So you need to conduct a background check first.
4. Everyone is Buying It
If you see everyone chasing after an investment, then that means it has become very popular in the short run. You might also be tempted to jump on the bandwagon, but remember that ‘hot’ stocks usually fall as quickly as they go up. So make sound investments after you have the right know-how about what they will give you.
5. Lack of Liquidity
You might sometimes need instant cash, for which you might want to pull out some part of your investment. If you want to do that, there should be no problems unless there is a certain policy. So always be careful about this, and have all your doubts cleared first.
6. Delayed Results
If a company releases its financial results after a long time, it can be a warning sign. Fred Auzenne says that this might also mean that the company’s auditors are not ready to sign off on the results, which again signals that this is a bad investment.
Final Words by Fred Auzenne
With these warning signs identified by Fred Auzenne, you can carefully check how good an investment is before you make the final decision. Remember that you must reduce the risk as much as possible. At the end of the day, it is your investment.