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Shawnclay
Gallente
Center for Advanced Studies
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Posted - 2011.06.09 11:11:00 -
[1]
I see a lot of investment ideas, and not a lot of trust in these forums. I'm guessing a lot of these fail or are scams. So those of you with some experiance, what would be the rules for investing in somthing? Is any investment safe?
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Tanaka Kharn
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Posted - 2011.06.09 11:31:00 -
[2]
Nope nothings safe unless you stick to loans with 110% collateral that you hold not some "trusted" 3rd party.
That said moneys to be made In MD and many 3rd partys have a good rep.
Also audits dont mean your not gona get scammed.
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Magnu Stormhawk
Stormhawk Enterprises
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Posted - 2011.06.09 12:20:00 -
[3]
 Originally by: Shawnclay
I see a lot of investment ideas, and not a lot of trust in these forums. I'm guessing a lot of these fail or are scams. So those of you with some experiance, what would be the rules for investing in somthing? Is any investment safe?
The only rule is 'Don't invest what you can't afford to lose'
It's the MD mantra, but it is proven time and time again to be the only worthwhile advice you can give someone thinking of investing.
There is no safe. Other than collateralised loans, anything that involves trust is a gamble. The big fish are just as dangerous to invest in as the small fish. It doesn't matter what the business is and it doesn't matter how much information they give you. You have to make up your own mind and take your chances.
As a minimum if I am going to invest I want to see:
-a decent return
-a well thought through and well presented business plan
-the ability to withstand criticism under pressure
-an attitude that appeals to me
All of the above can be achieved by a good scammer, but the bad scammers can be tossed aside quickly if they are tested against certain standards. Until more tools are available to business managers and investors to reduce the reliance on plain old trust, we have to work with what we've got (very little).
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Hexxx
Minmatar
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Posted - 2011.06.09 12:20:00 -
[4]
Originally by: Tanaka Kharn
Also audits dont mean your not gona get scammed.
Put another way....audits help you make decisions, but they don't make decisions for you.
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Shawnclay
Gallente
Center for Advanced Studies
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Posted - 2011.06.09 12:39:00 -
[5]
Ok good.
I might do some moderate investing when I'm ready. I might consider setting up some sort of rating system for legit people.
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Hexxx
Minmatar
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Posted - 2011.06.09 12:57:00 -
[6]
Originally by: Shawnclay
Ok good.
I might consider setting up some sort of rating system for legit people.
Best of luck. I'll let you figure out for yourself why there isn't one already. 
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flakeys
The Great cornholio's
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Posted - 2011.06.11 09:25:00 -
[7]
Originally by: Shawnclay
I might consider setting up some sort of rating system for legit people.
Waste of time there mate.
Investment without 120% collateral being held by yourself is purely based on luck and if you browsed MD a bit you'll find most turn out to be unlucky.
My advice just don't do it UNLESS you like big risks for little turn over and have a wallet packet without knowing what to do with that isk or beying just plain lazy.
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Fred Barbossa
Free Mineral Collective
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Posted - 2011.06.11 10:26:00 -
[8]
Edited by: Fred Barbossa on 11/06/2011 10:26:18
Generally speaking investing here is more of a social event then a business event.
If you don't believe this try to think about why someone would take out a loan when they have to send "120%" of the amount to the investor to hold onto. 
That being said, scammers/burn outs/those who fail to make payments, have to start with small successful ipo's and bonds to gain more trust right? There is money to be made with those.
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Ghoest
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Posted - 2011.06.11 11:40:00 -
[9]
Demand 100% collateral.
Thats the only rule.
Wherever you went - Here you are.
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RAW23
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Posted - 2011.06.11 17:09:00 -
[10]
1. Get as much basic information as possible to build a risk profile. This in no way provides solid protection as people can certainly act against expectations but it does provide a guide as to when you might expect someone not to bother with scamming. The basic info I always want includes a) current outstanding unsecured debt; b) previous highest unsecured debt; c) earning history and potential, including current NAV; d) degree of activity. With this data you can see that if, for example, someone has held 20bil unsecured for 6 months, cleared that debt and then launched a new bond for 10bil then they are unlikely to be following a masterplan that will involve scamming that 10bil. It is important, however, to get a commitment, where possible, that additional funds won't be raised beyond a certain level or the 10bil could rapidly become part of a 100bil debt that may fit better into a rational masterplan.
Earning history and potential is also useful but by no means definitive. Someone who can earn 10bil a week and has actively engaged with the MD community for months is unlikely to be following a masterplan that culminates in scamming 10bil. Of course they may do so for the laughs but that is a different issue (see below). Degree of activity is worth bearing in mind as it may cast a risk profile based on the previous data into doubt. Whilst someone might not build a masterplan to scam 10bil after already not taking the opportunity to scam 20bil be aware that priorities may change over time. There may also be a desire not to screw certain old investors but to suck in new ones (see, for instance BB's decision to refinance a bunch of old debts immediately prior to scamming).
All this data can initially be asked for from the person you are thinking about investing in but you then have to trust them that the data they give you is true. Whenever possible get a third party that you trust to confirm this information via an audit or fact check. This in no way makes the data absolutely certain but improves the chances of not being misled.
2. Be very wary about investing in people that appear to be slightly unstable, erratic or eccentric, no matter how much you like them or respect them. Unstable, flighty and changeable personality types may be lovely people (or *******s) but the additional uncertainty involved will always make an investment more of a gamble.
NEVER invest in people that are contemptuous towards their investors/potential investors or who take pleasure in the suffering, inconvenience or pain of others. If someone values putting other people in positions of distress they may well end up deciding that distressed investors are worth more than ongoing business relationships.
3. Make sure you get a decent return for your risk. Acknowledge your own fallibility and ask yourself how often you would expect to be wrong. If you think something like BMBE looks like a pretty good bet, ask yourself whether you would be surprised if analogously good bets failed defaulted or scammed once in a year, two years, three years, etc à So, if it wouldn't surprise you if you took three years off eve and came back to find that at least one person you trust as much as BMBE or Grendell or Chribba or Darkness had scammed then it would probably be a good idea to only invest in such people if you can get an interest rate according to which one successful investment would at least balance out a failure (so roughly 3%). Obviously this is a non-rigorous rule of thumb.
4. Never be afraid to pull an investment if new information or behaviour makes you nervous.
These have served me pretty well as guidelines for investing but it's obviously not an exact science. As a final note, all this applies to unsecured debt. But in the case of secured loans remember that if you are not holding the collateral yourself it is never really secured although a belt and braces approach can provide some safeguards.
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Vaerah Vahrokha
Minmatar
Vahrokh Consulting
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Posted - 2011.06.11 17:14:00 -
[11]
Sticky worth advice above
Auditing | Research | 3rd Party | Collateral Holding | EvE RL Charity |
flakeys
The Great cornholio's
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Posted - 2011.06.11 18:29:00 -
[12]
The most important one , never EVER invest in friends ... and no that's not meant sarcastic but just as it states.
Feel free to give them money but don't loan out isk to them.Worst investment ever and ruins friendships , basically this one is like reall life tbh.
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Cetus Perle Rote
EVE Financial Services and Insurance
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Posted - 2011.06.11 18:32:00 -
[13]
Very good advice RAW +1
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Atima
Minmatar
House of Marbles
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Posted - 2011.06.12 11:36:00 -
[14]
Originally by: Shawnclay
I see a lot of investment ideas, and not a lot of trust in these forums. I'm guessing a lot of these fail or are scams. So those of you with some experiance, what would be the rules for investing in somthing? Is any investment safe?
My advice is don't.
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Grendell
Technologies Unlimited
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Posted - 2011.06.13 18:16:00 -
[15]
RAW +1
Grendell ♥
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Dethmourne Silvermane
Gallente
Saiph Industries
SRS.
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Posted - 2011.06.13 19:17:00 -
[16]
Originally by: RAW23
(A lot of solid advice preceding, plus the following)
..But in the case of secured loans remember that if you are not holding the collateral yourself it is never really secured although a belt and braces approach can provide some safeguards.
My rule of thumb is to treat this effectively as an unsecured loan to the third party, since a third party scenario is basically a transfer of trust.
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RAW23
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Posted - 2011.06.13 20:25:00 -
[17]
Originally by: Dethmourne Silvermane
Originally by: RAW23
(A lot of solid advice preceding, plus the following)
..But in the case of secured loans remember that if you are not holding the collateral yourself it is never really secured although a belt and braces approach can provide some safeguards.
My rule of thumb is to treat this effectively as an unsecured loan to the third party, since a third party scenario is basically a transfer of trust.
It's worth bearing in mind, though, that a third-party secured loan is at least a little bit better than just a loan to the third party as both the original borrower and the third party have to scam/deafult for you to lose out. There will be some possibility that even if the third party scams the original borrower will absorb that loss and still make good on his obligations (indeed, should do this as the use of a third party in no way absolves the borrower of his own commitments).
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flakeys
The Great cornholio's
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Posted - 2011.06.13 21:03:00 -
[18]
Originally by: RAW23
Originally by: Dethmourne Silvermane
Originally by: RAW23
(A lot of solid advice preceding, plus the following)
..But in the case of secured loans remember that if you are not holding the collateral yourself it is never really secured although a belt and braces approach can provide some safeguards.
My rule of thumb is to treat this effectively as an unsecured loan to the third party, since a third party scenario is basically a transfer of trust.
It's worth bearing in mind, though, that a third-party secured loan is at least a little bit better than just a loan to the third party as both the original borrower and the third party have to scam/deafult for you to lose out. There will be some possibility that even if the third party scams the original borrower will absorb that loss and still make good on his obligations (indeed, should do this as the use of a third party in no way absolves the borrower of his own commitments).
I used to call it a it a double risk you take.Instead of needing to trust one person you need to trust 2 persons.
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Dethmourne Silvermane
Gallente
Saiph Industries
SRS.
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Posted - 2011.06.13 21:17:00 -
[19]
I disagree, I'd say it's a watering-down of trust, in that you only need to have faith that, at most, one of the two people (bond offeror or third party) will scam. It's certainly the same as "You trust that one person won't scam" but instead of a 1/1 scenario, it's a 1/2 scenario - spreading your risk amongst a pair instead of all on one horse.
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RAW23
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Posted - 2011.06.13 21:17:00 -
[20]
Edited by: RAW23 on 13/06/2011 21:17:45
Originally by: flakeys
I used to call it a it a double risk you take.Instead of needing to trust one person you need to trust 2 persons.
But for your isk to be safe only one of them has to be trustworthy. Rather than doubling the risk you are doubling the chances of having your investment backed by at least one honest person (well, not really doubling but at least adding an extra chance that you may have a trustworthy person onboard, the potential value of that chance not being less than 0%).
Edit - beaten to it by Deth!
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