Yesterday, Mr. San Juan left us a task, a task for our Investment Management. Together with the task, he gave a statement. The statement is: “An investment is one which, upon thorough analysis, promises safety of principal and a satisfactory return”. The things that I think are vital in the statement are “thorough analysis”, “safety of principal” and “satisfactory return” which I will discuss later on.
Through the statement, he asked us to have a keen understanding and an ability to grasp the statement correctly. He asked us to internalize our thoughts and make an argument about it and answer the ultimate question on “How to avoid investment fraud?”
Investment fraud will use deception and sometimes trickery. Well, after all no one will fall for something if you’re not going to deceive him or her. For me, in order to avoid investment frauds you must first be observant, observant in a manner that you must thoroughly analyze the nature of the investment, how will it going to achieve its promises and how it will going to meet your expectations. You must research your way in order to achieve all of your questions above. And you could achieve it with none other than “thorough analysis”. Thorough analysis will be your bread and butter when it comes to investigating investment fraud (or maybe at investigating anything), so it should be the first and last thing you will consider in examining an investment.
The other thing that attracted me with the statement is that it says “safety of principal”. In my own opinion, I think of it as a guarantee that you will not have a loss based on what you have forego. Your principal will remain as it is and it will not go to somewhere else. But first, like what I have said, use the thorough analysis in order to understand why it will have a “safety of principal”. Investigate your way until you see why there will be a safety of principal.
The last thing would be the “satisfactory return”. Same thing with the “safety of principal”, it is also a promise made by the investee or in some cases a fraud. It is a promise that you will get a return or profit from your investment. But how will you know if it is true or not? Again, the same thing over and over. Use the thorough analysis to satisfy the questions in your mind. Ask and investigate how they will be able to give you a return. What they are going to do in order to give you the return they have promised you. Once you analyzed it all, reflect on it and think of whether it is possible or not. Never invest in something that you think is not possible or achievable or even attainable. Invest smartly.