How to smell a bad investment opportunity from a mile away

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Over the past few weeks, I have been on my book tour to Abuja and Port-Harcourt in Nigeria I absolutely enjoyed connecting with people at my book signing events. More importantly, I got to listen to quite a number of people share bad investment experiences with me Some of these stories were shocking and the others simply unbelievable Someone shared how he borrowed money to invest in a promising opportunity and lost it all. Now he's in debt. Another shared how she got involved in a real estate project and got her friends involved as well, only to lose over $25,000 Before I delve into how to avoid making bad investment decisions,  I need to start with this caution, don't be greedy for sky rocket investment returns The truth is no one sets out to make a bad investment decision, we are usually just lured by the promise of a high Return on Investment (ROI) The promise of a high ROI makes a lot of us throw caution into the air. We hear about an opportunity to make 1000% return on investment and we dive into it without asking some key questions. Trust me, If it sounds too good to be true, it probably is Here are some red flags that will give you a enhanced sense of smell Red flag #1 - You don't understand how the investment earns profit There should be a clear path from investment to use of funds and eventually to profit. Ask questions such as; What does the business do? What industry does it operate in? Is the business directly involved in the value creation process or are they merely bystanders? Does the business depend on recruitment of new members? The answers to these questions will demonstrate if it is a good investment opportunity or not. If  you're not comfortable to the answers to these questions, you might want to sniff your way out The path to profit might be enabled by technology but it is still fundamentally a business. For instance, there has been an increase in the number of crowd funding and peer-t0-peer lending platforms in Africa. While these platforms take advantage of technology to make it convenient for investor like us to invest, they are fundamentally not 'Tech' businesses. They are still exposed to changes in the industry they operate in.