By Mauricio Dreher
Many people in a town belong to the same neighborhood, school or religion. When you have someone who shares something in common with you, it can seem easy to trust. And, while this is very common in cases where you share a neighborhood, trust is also strong between members of the same ethnic groups and races. Sometimes, you feel inclined to trust others because you are on the parent board together at your child’s school, or because you are co-workers. Our social interactions provide us with ample opportunities to find fellow feeling with others and come to trust them.
Unfortunately, it is just this trust that can lead to trouble when it comes to your investment decisions. Members of various religious sects find themselves approached by congregants claiming to have some excellent information about an investment. Or, you might be invited to take part in an “investment opportunity” by someone you know at work, or by the parents of your child’s best friend.
You think that the investment is full proof because you trust the person offering it because you know them. You put in quite a bit of money, and then, after what looks like a successful run, your money evaporates as the investment finally tanks. Your “hot tip” has turned into a huge financial mistake.
Not Everyone is Out to Scam You
One of the signs that an investment could be in bubble mode is that you hear a lot of people talking about it. Another sign is high, quick returns without any discernible fundamental reason, which can also be signs that something is a scam. Even though you might be tempted to follow the herd and join in, it is usually a good idea to do thorough research first. Also, it is wise to review your investment plan together with your Wealth Management Advisor. If this new investment doesn’t fit with your goals, as well as with your long-term investment plan, it might be a good idea to pass. You don’t have to put your friendship at risk when you turn down investment “opportunities”. A true friend won’t pressure you into taking a financial risk you aren’t comfortable with.
So, before you make any investment decision, instead of listening to anybody close to you, look for the professionals. Talk to your Wealth Management Advisor as well as your Accountant, and always read the Fund Facts before investing.