Four Offshore Investing Mistakes

   1. No Due Diligence

   The worst mistake of all is doing no due diligence. There are 3 reasons for this happening:

•    Ignorance - you don't know what you have to check beforehand
•    Laziness - it's all just too much effort and trouble
•    Greed - you're in too much of a hurry to make quick gains

   Whatever the reason, accepting another person's claim that something is a good investment, without checking out the facts thoroughly, is asking for trouble.

   This is particularly so when a well-meaning friend is on a good thing and suggests you get in too.

   Firstly if anything goes wrong and you haven't done your own due diligence you will most likely blame your friend and there goes the friendship as well as your money.

   Secondly if the friend tells you about the high returns he gets every month (and he's been in it for two or three months) and that it's all a bit secretive the warning bells should start to ring.

   What's it beginning to sound like?

   Correct. A ponzi scheme. 

If you can't get contact names and numbers and research the investment yourself, it's virtually guaranteed to be a scam. Chances are, your friend's monthly receipts are probably about to cease and his capital has already disappeared.

   2. Too much due diligence

   In a sense you can't really do too much due diligence or unending searching. The latter can happen when you research one fund after another, get stuck in a perpetual cycle of research and never make a decision to invest.

   The unnecessary due diligence can happen when your investments are already established, suited nicely to your desired goals. Another potential investment earning more than your current funds, comes to your notice and the mistake you make is spending all your time looking into it instead of doing other things.

   Looking at new possibilities is not wrong, but if your current portfolio is already meeting your passive income goals, continually considering switching over to different funds can be an unnecessary exercise.

   3. Putting your money in 'half-way' accounts

   This is common when Ponzi schemes operate. You put your money into a friend's account or an account other than the investments, from where, it supposedly gets transferred to the investment.

   Don't send your money anywhere if:

•    you can't contact the fund manager
•    there is no address for the fund
•    you can't get the account number of the investment
•    you are not allowed to meet with the fund manager
•    you cannot get written documentation on the investment
•    your money does not go directly into the fund or investing structure (such as your trust or IBC).

   Remember that past performance does not guarantee future results. It is important to look beyond recent and current performance. Very high yields can often be followed by very low, even negative returns, if a fund is volatile. The performance drop could be due to a change in management, or because of downturns in a particular asset class held. Comprehensive due diligence could alert you to changes in management, investment style, and asset mix.

You are here:
Due Diligence Mistakes - The four most common mistakes people make in investing offshore.

Due Diligence - What is due diligence.

Due Diligence Basics - The most basic minimum due diligence to carry out on any investment.

Due Diligence on Offshore Funds - What sort of due diligence is required before investing in offshore mutual funds.

Due Diligence on Managers - What sort of due diligence is required on the manager of a fund.