People do lots of analysis before doing an investment. It is the general nature of human beings. But there are cases where people blindly believe something and invest their hard-earned money completely on some project which they don’t even understand. During my school and college days, I have been a victim of such bad investments. This usually happens with multilevel marketing. It is a good business strategy where the chain keeps increasing and people who started the chain and the early joiners will keep benefiting from it. Later at one point in time, the founder and the top few members of the chain will close off the business and get away with the money. I have personally seen that happening.
This particular situation is a huge investment mistake that I made in my life. But thankfully it was not a huge amount but just a little amount to see what Multi-Level Marketing is all about. I never received any returns from my investment and I also never received my principal back. It was clear and evident that I was cheated. Thankfully my investment was very small and I was able to bear the loss. But some of my friends invested in big MLM business and their efforts were drained like anything and ultimately there was no outcome from the project. The founders ran away with the money.
How to be careful from bad investments?
Today I have become a lot wiser than before. When there is a new project emerging and I get to know some details about the project, I investigate deeply to understand what the project is all about and then make my investment. When I say investment, I mean both my money as well as my time. Even if I find some projects getting good returns and if I’m not clear how it is happening, I will mostly refrain from making huge investments. So far I have made lots of investments in my life. Both in terms of time as well as money. Some of the investments turned out to be good and some gave me learning.
The first and foremost thing to be safe from bad investments is to know clearly about the project in which you are investing. If you are not clear about some aspects of the project, then it should be fine. But if you have no idea on what you are investing your time and money, then it is going to backfire on you and you can end up in huge loss. I will not say that for sure because in history there were also people who invested blindly and got their returns very well. But on a majority, the risk is very high.
Invest only the money that you are ready to burn
People are tempted when some cool projects emerge in the market. The reason can be because it gets overhyped or because they are very confident about the new project. But I would say, whatever be the case, invest only the money that you are ready to lose. That will be a good strategy in investment and especially if your investment is on high-risk projects. If you invest the money that you are ready to burn, you will not end up worrying about the loss and you will learn to move on.