Bubbles in the investment world occur in economic sectors that are difficult for most of society to understand and comprehend.

In the investment world, it is said that 90% of investors in new products have no idea how they work or how the product creates value. For example: investments in Cryptocurrencies, it is said that the majority, if not all, have no idea how they work or how much they are worth.

Now, detecting or realizing a bubble or a pyramid scheme is simple. The difficult thing is to control emotions so as not to fall into it , or rather, “the need and inexperience” of putting money where one does not know.

What are or would be the factors that make you realize that you are facing a scam or a bubble in the world of investments?

  • Massive influx of inexperienced investors (young people aged 18 to 25). This is the case of disruptive products and the current trend, such as cryptocurrencies in 2021.
  • New methods of valuation. When a new trend is created in the world of investments, it is said that we are facing a new paradigm that does not follow traditional investment methods. It is something different.
  • Increased levels of fraud . Where there is easy and fast money, there are scammers. The last decade saw a series of scams, Zoe, Vayo, CoinX, Kairos, among others, pyramid schemes that promised impossible returns around the world. During this period, a sector of society puts on a blindfold and participates in absurd and obvious scams by attracting technology and social networks outside of traditional methods.
  • The level of debt to invest increases . When greed is great, one takes on debt above one’s economic capacity, that is, not only one’s money, but one looks for other options, for example: one borrows or mortgages one’s property.
  • High concentration in the same type of investment. The same amount of investment can be seen in all of their investments. In other words, there is no diversification, there are one or two products at most.
  • A very rapid rise in assets. Any sharp or vertical rise in an asset does not indicate a healthy and clean environment, especially in the short term. It is a danger. A rise in an asset over 10-15 years is usually a good business, but in the short term it is usually a bubble.

For 100 years, the best investors in the world have proven it: first, the enthusiasm and curiosity to continue learning day by day and being patient with your money, as well as the discipline to stand firm in the face of the many temptations with which the market will try to seduce you.

By Sam Brad

The Great Writer and The Passionate Poet As Well, He Graduated from University Of Florida in Journalism and Brad have around 12 years of experience in news and media section.

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