"A Lesson in Due Diligence"

My favorite energy blogger, Robert Rapier, at the R-Squared Energy Blog wrote a great piece on doing proper due diligence. While he is talking about a specific case with a high-tech energy firm, the principles are exceptionally applicable to the investment world. Robert writes, "People sometimes ask me how - if they don't have any particular technical expertise - one determines whether companies are making fraudulent claims. I tell them that the simple test of 'If it looks too good to be true...' will work in the vast majority of cases."

Unless you are managing and investing all your money yourself, you should not have to do proper due diligence on every investment. However, you must always do proper due diligence on your adviser. It is a mistake to look at an adviser's performance history without giving respect to their investment process, due diligence process, client servicing, and transparency. Every adviser in the industry knows that clients want to find someone they can trust. It is merely a sales game. Do not let the emotion of making money cloud common sense thoughts like "is this too good to be true?"

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