Major Red Flags for MLMs: Avoid at all cost!

Someone recently asked about a too good to be true offer. This involved an offer where a certain company was acquired by a US Fintech company and there was a rare chance of having an exclusive gratitude shares exercise to distribute shares after this certain company list on NASDAQ.

Remember, the number one rule of investing is always NOT to lose money. If we put all 50% into investment and it goes south, our other 50% need to make 100% returns for us to not make a loss.

With my 2 years in insurance and my bad experiences with a few friends who brought me to MLMs (multi-level marketing/ pyramid schemes) talks and events, I could spot 4 major red flags that most often ring true for these MLMs looking to entice and hook unsuspecting people to part with their money. Over the years I have seen many of these shabby MLMs fold up. The landmark case has to be Sunshine Empire.

These RED FLAGS are:

1) Enticing offer/ rare opportunity: Create artificial scarcity
2) Limited time-frame to decide: Rush you to decision
3) Too good to be true returns: Often is false
4) Introduce a friend along and get kickbacks: fulfills Pyramid model

Often, someone will come to tell you that this is an EXCLUSIVE opportunity, it is NOT TO BE MISSED! You will regret missing up this chance because it wont come back again! This is a psychological marketing skill to make you feel "artificial scarcity". Something that is scarce always sounds like a good thing and a pity to give it a pass. This is how they get your attention.

Next, they will start pressuring you to make a quick decision to put money with them. This is despite you knowing nothing about them. They might even invite you to a "seminar" or "talk" where they again pressure you to make a decision on this Limited chance. Because it is a limited chance, you have to make a quick decision because it might not be there soon. This is an issue because as a guru said, NEVER BUY WHAT YOU DON'T KNOW. You cannot possibly know what you are buying if you are simply pressured into it and have no time to do your due diligence. But you need to be quick because this is a chance that cannot be missed.

Next, they will tell you, look forward to the HIGH POTENTIAL returns! You cannot get this anywhere else with mainstream investments. To illustrate high potential, they will throw to you big words that everyone knows like "Fintech", "Bitcoin", "Crypto", or even say certain celebrities are in it as well.

Lastly to make it even more enticing, if you can get another friend to join you, you can get more back! Why not right? Everyone wins!

I will siam far far away, got how far siam how far when these red flags are present.

Till Next Time,
K.C.

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Related topics:
1. About K.C. What is my story?
2. My 3Cs to money/investing
3. Why you need to set aside money for savings first

My first mistakes in this investment journey

I missed my chance to buy FLT REITs at a discounted price of $0.967 (Trading at $1.03) per share through the preferential offering as shown in the blue paper above. (Just kill me lol) I previously bought into Frasers Logistic and Industrial Trust because I believed it might give me the chance to participate in the accreditive offering. However, I did not know how this will come about even as I read how other bloggers/ investors had the offer on forums. The strongest memory I have was how one investor said he subscribed through the use of ATM but needed to know how much you are entitled or allocated to buy.

Today, I just discovered how. Much for my own loss.

In fact, I opened my letter box late (usually my mum does it and she didn't open it for last week). As such, I am late by 2 days when I could have accumulated more units at a much more attractive price, bringing down my cost per unit.

Anyway, no use crying over spilled milk.

The first signs of this came when I received the yellow paper about "Distribution Reinvestment Plan (DRP)" for FCOT. This was before I received the FLT's preferential offering which I deem as more attractive. I also similarly opened the letter late and as a result I could only receive my dividends in cash back to my bank account.

Learning points:
- A DRP might be a good tool to use to accumulate more units by receiving dividends in the form of units instead of cash. Not all REITs offer this.

- This is my first encounter on a Rights/preferential offering letter and I had no idea how most of these worked. Now I do.
- I will need my own letter box key from now on and I will check for my own letters. This is a necessary change since I have never checked the family letterbox.

Till Next Time,
K.C.