Wearing Your Broker’s Beer Goggles

You wouldn’t drink and drive and you definitely wouldn’t drink and invest, but for some that is exactly what they’re doing. You talk to a broker or someone else about an investment opportunity, and even though you know better, you become drunk with the possibilities of getting a ridiculously huge return on your money. This is called wearing your broker’s beer goggles. You start off looking at an investment possibility with a skeptical eye. Then you hear more and it starts looking better. The next thing you know you’re in the middle of it, and when you wake up, your regret might be that you just made the worst investment of your life.

For some, the world of investing is scary. The investor is expected to give his or her money to someone who is probably all but a stranger and hope that they can turn that initial investment into more money. Then, just when an investor begins to feel like the water is relatively safe, they read about Bernie Madoff and other Ponzi schemes in which seemingly sophisticated investors lost huge amounts of money that most will never see again.

The Ponzi scheme has been a part of the financial market vernacular since the early 1900’s because it is simple, as long as the bad guys are willing to take off with the receipts once they have enough money. With the Ponzi scheme, a person gives an “investor” money out of a promise for a 25% increase in investment. The false investor then gives them money to prove they’re making some kind of return on investment. Following, they’ll get money from a third party that proves the same to you. Eventually, the bad guy has enough money and he disappears with the loot and the investors are left with nothing.

Other common frauds include affinity frauds in which people with similar interests such as a church or other group sell each other on investments that can’t be passed up. The original investment is either nonexistent or just plain bad. The broker only has to convince one or two people in the beginning, then sit back and watch.

Another common fraud that may be going away with new laws is annuity misrepresentation. This is fraud by nondisclosure. The agent fails to mention that there are large commissions for themselves attached to purchasing and trading. When considering all that is at stake, many investors face a dilemma about what investment strategy is safe so they can best take care of their loved ones.

One solution is to use a trusted service to evaluate and certify your investment before you take the plunge. It is easy to fall for smooth talkers who can convince you that their investment will change your life. Unless you are a broker, you most likely don’t know what red flags to look for, and even if you do know, those red flags may be hidden from ordinary investors. That is where Farnsfield Research comes in. We have strategies to determine if your investments will be with honest people by using our own eight step verification process.

  1. Strategy developers have been referred to Farnsfield Research by the third party.
  2. There is a strategy application and survey. Smooth talk won’t get the job done.
  3. Every strategy developer we work with is licensed from a governing body for trading/investing which might include CFTC, NFA, SEC, FINRA, CSA, ASIC and others.
  4. Developers must let us see their strategy to review. We can spot trouble by using our analysis.
  5. We prefer companies and traders who have been working in the market for at least 10 years.
  6. We want to see five years of back test results to see how well their strategies hold up.
  7. We’ll ask for and expect live brokerage account statements from at least the past year.
  8. We engage in a soft strategy start in which some of our affiliates will begin to trade the strategies from the fund or broker. This will tell us about how viable a trade partner and investment opportunity really is for you.

Keep the beer googles off and do all you can to determine if an investment is good for you. Let Farnsfield Research help you keep investing safe.