How often do we hear the adage, when describing an opportunity, “It’s too good to be true!”
It is easy to look for – and find – opportunities which are seemingly too good to be true. It may be a "lose 50 lbs. in 30 days" opportunity. It may be a "buy my real estate investor coaching package, and make six-figures your first year!" opportunity. Perhaps you've heard of someone who can make you a "20% return per month" through day trading. Or perhaps you've been invited to invest in a commercial real estate venture capital fund. How do we judge whether those opportunities are legitimate or not? How do we know if a business or investment opportunity is literally too good be true, or simply, a very good opportunity?
Here are some thoughts and ideas to consider; perhaps some of these thoughts may help you save – or even make – hundreds of thousands of dollars!
1. Never, ever, EVER risk more than you can afford to lose! If you have $100,000 invested in various funds and strategies, and you are presented with an opportunity which seems too good to be true, how much of that $100K can you afford to lose? If any “investment advisor” is recommending you put an overly large percentage of your money into a single investment fund, they DO NOT have your best interests at heart!
2. In any investment portfolio, a single investment strategy should never be more than about 20% of your portfolio. Whether you invest in real estate, bonds, precious metals, venture capital opportunities, mutual funds, day trading, or bitcoins: DIVERSIFY! If one market segment crashes, you have other eggs in other baskets which will hopefully not get broken! Even if that “once-in-a-lifetime opportunity” presents itself, stay diversified!
3. Warren Buffett’s top rule of investing is “Don’t invest in something you don’t understand.” There are many investment opportunities I don’t fully understand – the stock market, for instance! That doesn’t mean I shouldn’t invest in the stock market. It does, however, mean that before I attempt to take on that strategy, I should rely on a wise, credentialed investment advisor to invest in the stock market for me. DO NOT invest in some opportunity that seems overly complicated! Which brings us to our next point...
4. Do your homework! Find out all you can about anyone who presents an opportunity. Research their track record. A simple google search may reveal that an advisor has had legal issues elsewhere. Ask for referrals from other investors. Ask to see their credentials Call the state securities division, and ask them about the advisor and about the opportunity.
5. If the opportunity is presented as a “now or never” opportunity, make it “never.” NEVER jump in to an investment opportunity until you have done the thorough research required to vet the opportunity properly.
6. “Hedge the bet.” Look for opportunities that you can insure, or collateralize. Do everything you can to protect yourself against loss. If you invest in a business, look for some way to secure the investment.
Montera Captive Insurance Management helps business-owners protect their businesses against all kinds of risks and possible catastrophes. Our team of skilled professionals can help you identify risks your business is exposed to, which you may not have even thought about! Investing in a captive insurance strategy allows you to protect your business with significant tax benefits, if done correctly! A captive insurance company allows you to build a safe, secure, financial war chest for the future, while protecting your business against unusual risks; even those situations that arise which seem too good to be true!
Let a professional from Montera Captive Insurance Management show you the many benefits of forming your own captive insurance company!