5 Warning Signs of Bad Investments (and How to Handle Them)

Investments are a wonderful way to improve your finances, but telling the good from the bad apart when it comes to investing can be a challenge. Before you know it, you could find yourself falling down a rabbit hole as your investments collapse around you.

What are some of the signs that indicate your investment prospects may not be as good as you think?

If you’re concerned about bad investments, you’re in luck. Here are just a few signs that you should ditch your current investments and find something new.

1. Lack of TransparencyBad Investments

Many companies will keep their investors in the know when it comes to their operations and corporate actions. If you are suddenly cut off from this information, you may need to be concerned.

When a company finds itself in trouble, it may try to cover up its shortcomings by hiding information from its investors. If a company suddenly cuts contact with you after being social for an extended period of time, you may want to pull out of the investment.

If you are curious about your legal right to back out of an investment, such as your legal rights when canceling a timeshare, it’s important to do your research before backing out.

2. Rising Debt Levels

While all companies have some form of debt, rising debt levels are something to keep an eye on. This can signify that the company is functioning based on their debt alone, which is a serious risk. Your company likely can’t sustain itself and has had to rely on other means to function.

3. Sudden Goal Changes

Did the company you invest in have high goals that they suddenly changed? Sometimes, struggling companies adjust their benchmarks or goalposts to hide their failures; it can also mean that they are frequently changing their business strategy, which can be a risky venture.

4. The Company Delays Their Results

All companies are required to release their financial results for their investors to see, but struggling companies may delay their results in order to keep their investors longer. If your company is hesitant to release their results or plans to post on a bank holiday when it won’t be acknowledged for an extended period of time, you may want to pull out.

5. Promises Seem Too Good to Be True

Some businesses will throw out high numbers that you can look forward to when investing with their company. However, remember the old saying “some things are too good to be true”- these companies are likely overestimating your profits in order to bring you in as an investor. This is a serious red flag to watch out for, so take any promises made with a grain of salt.

Avoid Making Bad Investments

Bad investments don’t have to be the end of your finances. Now that you know some signs to look out for, you can pull out of risky investments without needing to worry.

Have you been trapped in a bad investment before? What was your experience like?

We’d love to hear your thoughts. Leave a comment down below with your experiences, and continue reading our blog for more helpful tips today.