Financial quick fixes – identifying the economic snake oil

Professional sport isn’t the only field where participants succumb to the lure of cheating in exchange for promises of victory.

The field of investment is full of people promising huge returns in exchange for ‘dead cert’ quick fixes. These may not be illegal, but as they’re not based on a strong fundamental understanding of an individual’s position, they can be much riskier than using legitimate tools to improve your financial position. No financial proposition can be all things to all investors and hope to provide uniformly great results. The opposite is true much more often.

If someone is offering you something that smacks of a ‘get rich quick’ scheme, there are ways to judge whether the offer being spruiked is legitimate or not.

An offer claiming to guarantee great results in a short period should immediately set off some warning bells. This is particularly true if the offer is based on only one factor – some kind of magic bullet solution that doesn’t take the fundamentals of your personal financial situation into account.  Any one-note, ‘cast iron guarantee’ offer is not likely to be a healthy investment option.

If the investment spruiker only offers one kind of investment method, rather than alternatives, it’s another warning sign that the financial options are more of a marketing exercise than fully assessed investment opportunity. Its parameters are more likely to be too narrow to be a good risk.

Some of these financial propositions are pushed out with an artificial sense of urgency. Don’t let FOMO drag you into a major financial decision that you don’t’ fully understand. If you’re not sure of the fundamentals of the investment, don’t make hasty decisions, even (or especially) if the person is pressuring you with discounts or hard, immediate deadlines. Good, sound investments should stand up to scrutiny – you should be able to have them examined by an independent advisor who can assess the risks and potential returns.

A final heads-up is to pay attention to who is making the offer: what is their field of expertise and how narrow is it? How independent are they as a source of advice?

ASIC has some guidelines on choosing an investment advisor and on identifying and avoiding investment scams. Alternatively, if you would like to speak with a professional investment adviser about a too-good-to-be-true investment offer someone’s made, contact United Global Capital today on 03 8657 7640 or email [email protected] for a no cost, no obligation consultation.

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