Learn an expensive investment lesson for free from an expert

Thanks to Vandalin the Romantic for what can be learnt in this incident. For me, it’s a very expensive and painful lesson. But like it or not, what happen has already happened.

What’s more important is to learn from this lesson and don’t make the same mistake again.

Once again, credit must be given to Vandalin for writing this email for me to learn about it. I must thank him for his precious time spent to craft this out. Thanks a lot!

Alright, here’s the “expert’s” point of view.

Like it or not, folks there is not “ignorance is bliss” when it comes to investment and trading.

1. Caveat Emptor. Buyers beware. That’s the excuse when even the “big boys” use, especially when suddenly your mutual fund which your advisor was praising to the sky plummets like a fucking rock even when they have a “diversified portfolio” and “risk minimization”. Strangely enough, even in times like that, they still get “management fees”.

So since ignorance is no longer an excuse, it’s time to get educated and learn how to read BETWEEN THE LINES.

2. Due diligence. Understand what the money you have invested in is used for. Understand what EXACTLY you are investing in. The person that is selling you the product? the company? the venture that the company is going into?

JUSTIFY the return on revenue. If they are getting back an estimated 30% returns, and you are suppose to get 40%. Forget it. Nobody is going to ask money from you and make a loss in the process. They might as well donate to the “new age monk early retirement fund right now”.

3. Let’s take a look at the contract. Since we have a good example right here, hey, let’s use it. Note also, that an INVESTMENT contract means that you’re liable for unlimited loss. Meaning that you’re gonna expect to lose everything, unless an amount is agreed upon. Next, consider if the company is suppose to be able to take in investments in the first place. Companies in Singapore need a license to receive money from the public. If not, they are to give something back in return.

That means, that for $2,000 in investment, our monk is suppose to get back X amount in terms of services, or shares, or SOMETHING. Not just a piece of paper.

If not, then it is a personal loan to the company. If so, then it should be backed by something tangible of equivalent value. Shares in the company should the contract be exercised would be nice, especially since if you are a shareholder, you can demand for the company accounts and books from ACRA if anything cocks up.

4. Understand your worst case scenarios and recourses. What’s gonna happen if something fucks up? Nobody likes to think about it, but we all need to know what the worst case scenario is. If you are naturally optimistic, like our dear monk, look for doom sayers and get them to rip apart the entire deal.

5. Read between the lines. If something sounds too good to be true, ther are probably some kind of catch in it. Find it. If you’re not bastard, twisted or deviant enough to read between the lines, find someone who is. Your friends who have businesses in China, Indonesia and all those countries where corruption is rife would be good.

Well there are other ideas that I can give, but let’s leave that for another day.

Maybe one now should write on the RECOURSE available. Popular demand of course. Laters!

For those who read this, read and pass this post “Help me spread this around. This may help lots of people.” to others, I need more people to be aware of it.