Beware of bad investments – my experience last month with a questionable investment proposal

A month ago a friend and I went to a presentation by a company called Flipping 4 Profit. The company buys properties, renovates them and then sells them quickly in order to realise a quick profit. While I have nothing against this form of investment, there were several issues with the presentation that left me feeling very uncomfortable. Some of the issues, and why they bothered me, were:

  • The presentation video they showed us spent a lot of time showing emotive images of expensive cars and big houses while asking “isn’t this the kind of lifestyle you would like to have?”, at the same time as being quite vague on the details of the scheme. Investment decisions need to be made unemotionally. By selling the scheme on a lifestyle rather than the actual scheme they neatly sidestepped having to provide the necessary information needed to make an informed decision. The highlight for me was when the presenter got her cellphone out and showed us a picture of expensive cars, which she claimed were hers as a result of investing in the scheme.
  • If someone is going to give investment advice, they are required to be FAIS registered. This helps ensure that they are qualified to give you the right advice. I am almost completely certain that the presenters were not FAIS registered and thus not qualified to give investment advice.
  • The presentation spent a lot of time showing the returns they had made on a few specific properties. I asked for an indication as to how the scheme had performed as a whole, because your actual investment return is from all the properties purchased, not just the best ones. Not only did the presenter not have this information on hand, she guaranteed me that if I invested today I would have my money back plus at least 50% within six months. Higher expected returns come together with higher risk. You cannot promise astronomical risk-free returns.
  • A large part of the presentation dealt with how you could make money by referring other people to the scheme. This concerned me, firstly, because it gave the impression that anyone could go out and sell this investment without being FAIS registered, which is not true. Secondly, the scheme needs to generate enough returns from their investment in property to deliver returns to members as well as pay commissions those who refer members. I’m not saying that the scheme is a pyramid scheme, but there are a lot of worrying signs that the investment structure is not sustainable in the long term
  • Finally, the presentation they showed us had a few spelling errors in it. While I am a bit of a grammar Nazi, incorrect spelling on a business presentation speaks volumes about the quality of the proposal and the professionalism of the presenters.

I left the presentation and told my friend to not invest in the scheme, for my reasons above. My friend isn’t familiar with investing, so he actually left the presentation thinking that it looked like a worthwhile investment before I spoke to him.

When it comes to investing your hard earned money, you need to be wary of any proposal that sounds too good to be true. There are a lot of high quality, well managed options for you to invest in. Good investments don’t over-promise on their expected returns, while so many of the investment schemes that have imploded in the past have been on the back of impossible promises made to investors.

 

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