By: George Shirley Any opinions are those of George Shirley and not necessarily those of RJFS or Raymond James.
I often get asked by clients for an opinion on investment opportunities that fall outside the scope of registered securities. After the requisite disclosures that I am not licensed to give investment advice about this, I usually pose a series of questions:
What is the best case scenario?
What is the worst case scenario?
Does it make your life more or less complicated?
Are there likely to be additional investments that will need to be made after the initial investment?
Will you need to devote a significant amount of time in addition to money?
Many relationships (family, lifetime friendships) can be damaged beyond repair over an investment deal that goes south. And often the potential upside was not really all that attractive to begin with-certainly not enough to put the relationship at risk. Evaluating the worst case scenario and deciding whether you can live with the consequences can help to frame the opportunity in a way that changes the decision making process. If I presented with you an opportunity to potentially double your money in 2 years, but the downside is that it would cause irreparable damage to your relationship with your best friend, is this a chance you would take?
Many times avoiding bad outcomes is a much better strategy than chasing opportunities. The cost of being wrong can be too great.
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