Is this a sound investment, or one that should be avoided?
A friend approached me with an investment opportunity and I would like to know if it sounds legitimate. It involves investing in a company that engages in proprietary trading of international currency, by being a lender to the company. The company guarantees 12 percent or 25 percent of the spread, whichever is greater. As a lender, you are given a 90-day perpetual note that automatically renews. If you choose, you can call in the note at any time, at which time it reverts to a 90-day note. At the end of 90 days you can get all of your money back. If you want to, you can take out any interest you've earned each month. You can view how much interest has been deposited into your account on a daily and monthly basis.You can also participate by rolling over existing IRA accounts to a self-directed IRA company. The trading company is regarded as an institutional account and is approved by the IRA company. If you choose, you can have the monthly interest you earn sent back to your account at the IRA company to make other investments. Does this sound like a legitimate investment opportunity?
First of all, this is not your friend. Second of all, you need to call the state securities regulator in your state and turn them in TODAY!!!. They could have already scammed several people out of millions of dollars and this needs to be stopped right now. It is highly likely to be a Ponzi scheme.
Advice for you is to live by these rules. Never buy anything that is not publicly traded and never buy anything that is not liquid. If the investment is not publicly traded then a red flag should immediately go up. Your investments must be in publicly traded investments only.
Never invest in something illiquid like "90-day perpetual note". Are you serious? This is the biggest bunch of hooey. They are crooks. Report them to authorities.
Your money should always be liquid, meaning that you should be able to get your money through a reputable firm like Fidelity, Schwab, TD Ameritrade in as little as two business days. Anything else and you are likely talking to an unscrupulous advisor, if not a Ponzi schemer.
This sounds completely phony. Usually those who promote these kinds of fake "investments" are paid upfront which is a strong clue that it is a fraud. You will end up getting some "dividends" for several months and then they will suddenly dwindle with no advance warning. At best you'll get back about half of your original investment. People fall for these schemes every day.
Stick only with investments which are registered with an official exchange or with a registered government entity. "Special opportunities" are special only for their promoters.
NO, IT DOES NOT!!!
When investing, make sure that what you are investing in trades on a recognized exchange ONLY. You need that in order to ensure the liquidity of your investment, ie., that you can find a counter-party to sell this to when you want/need to get out of it.
The hare-brained scheme you describe makes no sense and simply the "guarantee" of a % of the spread should be a red flag by itself. It takes one of the riskiest activties that exists in finance, currency trading, and somehow creates financial guarantees out of it. Repeat after me, this is a scam.
You may want to seriously review your friendship with person who presented this to you.
It is so hard to tell based off of this description and without understanding prospectuses and about a million other questions. I can certainly tell you this however if it were me I would avoid. I think the risk reward is not worth it and if it took you this long to describe it I'm sure there are a ton of potential pitfalls. I am not a fan of short cuts on investing and this seems like a way to do so. I've seen similarly described products lose 100% of the value in my day. These things sound good and look good until something changes and that can happen very quickly.
Dear is this a sound investment?
Any time I hear the word "guaranteed" when it involves any type of investment I would think twice.
There are many secure opportunities out there to make an investment and have your money grow with more stability and less risk than what you contemplate investing in. First of all there is no detailed information given about the lending company, the 1-5 and 10 year track record, how they expect to guarantee earnings.
Because you are questioning utlizing your hard earned money for such a venture, I ask you to stop to garner much information, much education and mentoring from a long term accomplished advisor who is able to direct you in ways that will yeild you return on investment but do this soundly in innovative established companies.
All the very best to you,
Jan Attard, RIA, MBA
J. Oliver Maxwell, LLC