6 things to avoid when investing
Today’s cost of living in Nigeria pushes many people to look for ways to grow their incomes. Unfortunately, many bad actors are masquerading as business owners seeking investment. They ask Nigerians to invest in their businesses with the sole aim of defrauding them. There have also been several reports of celebrities’ marketing investment plans for companies that cheat innocent members of the public.
When it comes to investing, avoiding common mistakes can significantly impact your success. Here are six things you should not do.
Don’t go in blind
A business solutions advisor, Wole Oyeniyi, said having an understanding of the business you want to invest in is crucial to your survival in that project.
He said, “Knowledge is a crucial element in successful Investment and as such, it is better to avoid investing in a business you know nothing about. If the investment opportunity is one you don’t know anything about but your hunch tells you it might be a winner, find a professional in that field to guide you on how to make your investment safely. Anything short of this approach is gambling.”
If it sounds too good to be true, run!
Oyeniyi explained that it is not that difficult to spot a bad or shady investment, adding that the promoters are often sketchy on how capital collected from investors will be deployed, and about other important details.
He said, “They won’t want you to involve your lawyers or ask probing questions. High returns will be promised and the venture will be painted as fail-proof. In my experience, the easiest way to tell a bad investment is to compare the returns promised by the promoters with what is generally applicable in the industry. If it sounds too good to be true, preserve your capital for future opportunities.”
Don’t fall in love with the company
Falling in love with a company is shifting your focus from the performance of the company to its leadership or other areas not of concern. This, according to an investment consultant, Tobi Akanni, can blind you from seeing the risks and potential loss you may suffer if the investment goes sideways.
He explained that, “You want to invest in the company to make money legally, not because you necessarily like the company. Your primary concern should be how the company is performing and how it affects your returns. So, if the fundamentals of the company change, you should consider exiting.”
Be patient
Akanni noted that while it is safe to exit from an investment sometimes, you should also exercise patience for as long as you do not have strong reasons to leave.
“A slow and steady approach to growing your investment is to exercise patience. It yields better long-term returns. As long as you have no reasons to doubt your investment, you should wait for as long as it takes for it to start turning in your returns,” he explained.
Avoid illegal investments
Oyeniyi said people should avoid investment opportunities that put you at variance with the Laws of the Federal Republic of Nigeria, adding that “the promoters of such illegal ventures will promise you superlative returns but no return is worth losing your liberty for.”
Agreeing with him, a corporate practice lawyer, Funsho Adeola, said, “Before investing in any ventures, it is important to consult a lawyer to help you confirm the legality of the investment. There are many companies who will approach you with sweet returns on investment but they only want to use your money, face, and other details to run an illegal project.”
When an illegal investment backfires, you will not only lose all your money but can also face arrest and legal prosecution.
Don’t invest without a well-planned exit strategy
While people go into businesses because of the potential profits, having an exit plan affords you to know when to quit. Oyeniyi said if you are not clear on how you will divest from an investment from Day 1, that investment is not for you.
“Shady business promoters will promise all sorts of guarantees, but if you pay close attention, you will notice stark contradictions. In such an instance, it is better to save your capital or choose a more conservative investment,” he added.
According to experts, your capital is too precious to be wasted away in the name of investment. Successful investors are not always the smartest people in the world but they are people who know not to be swayed by shady characters with promises of returns that are too good to be true.
