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
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