5 ways you can tell if something is a bad investment idea?

Investors are constantly on the look-out for great ideas.

They may not be new ideas, they could simply be a new take on an old format, but a good idea is what makes business go around. 

Not money, but good ideas.

Unfortunately, some ideas that seemed like good ideas at first turn out to be bad ideas.

There are many things that make an idea bad.

It could be the mismatch of the people and the idea itself.

It could be a lack of research or it could have legal implications that could cause problems.

So what are some of the signs that an idea is a bad one?

Here are a few:

1. THERE ARE LOTS OF UNKNOWNS

If the idea that is being pitched to you has a lot of variables then watch out. 

You can only control so much in life and business, but some ideas are safer than others.

If there are too many things that can’t be accounted for or predicted you should be concerned.

The property market is an excellent example of speculation that is grounded in solid historical data.

We don’t know exactly what it’s going to do from one decade to the next, but we can get a good idea from doing research and looking at what’s happened previously.

That’s what makes good property investment reliable and attractive.

But if you can’t research the idea, or there are too many factors beyond your control, then tread carefully.

2. EVERYTHING IS HURRIED

If the idea that you’re being asked to invest in is open to you for a limited time only, be careful.

You should never be forced into investing and if you’re feeling pressured to snap something up within a short period of time, then that should raise alarm bells.

If it’s a genuinely good idea, you should be allowed the time to interrogate it.

To see if it stacks up and is worth your hard-earned cash.

Otherwise, walk away.

3. IT’S HIGH RISK

High-risk ventures are often seen as a fast-track to making money, but they’re often the fastest way to lose it.

There’s a good reason that superannuation funds move their investments to lower-risk stocks when you’re approaching retirement.

If you lose a lot of money, you won’t have time to recover it. 

If you’re in your 20s and 30s, your superannuation is likely to be invested in high-risk funds.

The lesson here is you should never invest in a high-risk project without some sort of back-up plan as to how to recoup that money should it all go belly-up.

Don’t rely on it working.

Presume it won’t.

What would you do then?

Some ideas are just too risky.

4. IT SEEMS TOO GOOD TO BE TRUE

That old saying, “If it seems too good to be true, it probably is” is especially true in business.

I’ve written in the past how nothing worthwhile comes easily, you have to work hard to become wealthy and you need to be smart.

There is no change without a sacrifice of some kind. If an investment offers the world, without any risk whatsoever or any sacrifice or effort on your part, then you have to wonder whether it’s too good to be true.

5. YOUR GUT SAYS SO

Our instincts are excellent beacons of what’s right and wrong. 

I’m sure most of you at one time have had a gut feeling about something, whether it be a good feeling or a bad one.

Sometimes we override these feelings, but it’s important to trust your gut when you have those moments.

The above advice isn’t intended to make you cynical or overly cautious.

But it is designed to remind you that a good idea is hard to come by and that’s what makes them so special.

So think twice, and look before you invest!

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.