All that glitters is (not) gold

Happiness resides not in possessions, and not in gold, happiness dwells in the soul.

- Democritus -

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Have you ever made a bad financial investment, one which you were conned into? It's ok if you don't want to say, it can be embarrassing I suppose, you know, admitting we were duped into parting with hard-earned money. I'll admit that it's happened to me, when I was a much younger man, and sure, I felt like an idiot, but I learned a valuable lesson.

I knew the guy through my work, he was a customer, and over time we became more friendly. About two months after I met him he told me about a system he was developing for the automotive trade, a system that would retro-fit to a car and do some things. It sounded like a decent product so I was open to learn some more which I did over the next couple of weeks. It was then he brought me an investor pack which seemed very official looking and professionally presented. I accepted his invite to the upcoming investors evening and along I went with my wife to hear them out.

A few days later I decided to buy some shares and handed over a thousand dollars and received my share certificate. I felt good about it as I'd done my due diligence, understood the product, their plans for marketing and promotion, production, where they would stock the product, projected sales and profits and so on; there were other elements but you get the idea.

Not long after that, about six weeks, he came to see me and suggested there might be an opportunity to pick up some more shares prior to the price rising and he showed me the revised product the engineering team had been working on. I ended up investing another one thousand dollars.

Here's the thing...About six months later I was contacted by a lawyer who was acting on behalf of a group of my fellow-investors. Apparently there was a meeting taking place in which the owner of the company would address the investors in respect of some issues that were raised; namely, the misappropriation of funds which means, the illegal use of another person's money. And that's when I started to understand what was happening.

It didn't go well; the meeting. There was much ranting and raving by other investors and the company Director, a lot of accusations and some pretty weak excuses too. As it turns out the funds he was gathering were being used by the fellow and his family to provide a life of luxury comfort and...it was all gone with no product to show for it.

There were many in the room who had invested a few hundred thousand dollars each and many, like me, who only invested a few thousand, but all were feeling pretty angry and whilst my two thousand dollars wasn't going to affect my life too badly I was pretty cut by the fact I'd been duped.

I never got my money back. I could have pursued it through legal channels although the cost of doing so would have negated the gain. I let it go and moved on. I guess I looked at it as a two thousand dollar learning experience and, since that time, I've not been pulled into something similar so it was a good lesson.

Sometimes financial investments can seem so attractive on the surface; they show great potential returns and can seem infallible. It's not always the way though. Just because it looks like gold it doesn't mean it is gold.

It's sometimes difficult to know if an investment opportunity is legitimate or not and no matter how cautiously we approach it we can still get stung, like I did. Research is the key though, performing due diligence and speaking with trusted advisers in an attempt to learn as much as possible prior to jumping in. I did that, prior to investing back then...but still got stung unfortunately.

We can't mitigate every risk when it comes to investments however we can learn from mistakes which, hopefully, don't break us financially in the process. Have you ever been involved in a dodgy investment that caused financial loss? Feel free to tell me about it below.