As an attorney practicing business litigation for many years in the Orange and Los Angeles County areas, the cases that I see related to investments, i.e., those that end up in litigation, are usually the non-traditional types of investments.
The marketplace is saturated with inexperienced business people promoting the next great idea. Most have good and honorable intentions, but simply lack the sophistication and experience needed to make the deal work.
Then there are the dabblers, dilettantes, the quasi-legitimate, and the actual con-man; peddling all types of get-rich-quick schemes and investments. Investors and deal makers should be aware of the problems surrounding real estate development deals, gas and oil drilling, preferred stock offerings in companies no one has ever heard of, small business start-up capital offerings, Limited Liability Company formations, and so on. They always seem to promote them as “can’t miss,” “guaranteed” or “promising high returns with little or no risk.” Sound good? Think again.
Besides the risk of losing your entire principal in these unconventional and non-traditional investments, you could also end up taking on liability well beyond your investment.
It is always prudent to consider investing in the well-proven, time-tested traditional investment vehicles that have always been available to most investors. Publicly traded stocks, bonds, mutual funds, annuities, quality real estate investment trusts, etc. Even when the market declines and the value of the investment follows, you still retain most of your principal. In other words, you don’t “lose it all” and take on some unforeseen lawsuit from some unknown claimant that you never even considered.
Remember the words of the famous writer Clason; “Gold flees the un-cautious owner that that is unskilled in its keeping and attempts to force it to unrealistic earnings.”
As always, seek the advice of experienced legal counsel, and in this case, an experienced financial advisor, when considering any business arrangement or investment.
Thomas F. Nowland is an experienced Southern California Business lawyer practicing in Newport Beach California.
949-221-0005