How to Protect Yourself as an Investor

Over the years, I’ve seen this time and again—not just with clients or colleagues, but in my own early ventures as well.

Recently, someone asked me:

“David, when you’re considering a new investment model, what precautions do you take to guard against unknown risks?”

It’s a fair question. And the answer is rooted in a couple of fundamental rules I follow without exception.

Rule #1: Never Invest in What You Don’t Understand

Too many people jump into the next exciting deal with visions of high returns, passive income, and early retirement. But here's the truth:

If you can’t explain the investment on the back of a napkin, you shouldn’t be in it.

Complexity is an investor’s worst enemy. And it’s not just about scammers or bad actors. Even well-meaning people with promising products can unintentionally bury risks deep inside spreadsheets and projections.

If someone can’t explain it to me simply, I walk away. That may sound overly cautious, but it's saved me—and others I’ve coached—from a lot of unnecessary heartache.

Investors often get caught up in the hype, only to later realize they never really understood how the model worked in the first place.

Rule #2: Trust Is Key—But Verify Everything

Yes, relationships matter. I prefer to invest with people I know, like, and trust. But even then, trust doesn't eliminate the need for due diligence.

I've seen it all:

• – Investors who went “all in” too quickly, only to be burned when the deal collapsed.

• – Well-intentioned partners who underestimated the risks, resulting in underperformance or total loss.

• – Sophisticated presentations masking fundamental flaws, which could have been spotted with just a bit more scrutiny.

Start small. Learn the terrain. Then, if the fundamentals hold up and the people check out, you can scale with confidence.

Why People Get Burned and How You Can Avoid It

In today’s market, financial literacy is your best line of defense.

According to a 2023 FINRA report, nearly two-thirds of Americans lack basic investment knowledge. That's a dangerous gap.

And it’s not just about making money. It’s about building freedom—the kind that comes from assets that produce consistent, dependable income.

Investor Due Diligence Checklist

Here’s a practical reference guide to help you evaluate any new investment:

1. Can you explain it simply?
   If not, it’s too complex.
2. Do you understand the risk and return profile?
   

   Is it fixed income? Equity? What’s the downside?
3. Who is behind the deal?
   Know the operators. Vet their history and integrity.
4. Have you seen real performance—not just projections?
   Look for past results, not just future promises.
5. Have you allocated only a small portion to start?
   Never go “all in” without proof of concept.
6. Does it align with your income production goals?
   Will it generate reliable, sustainable cash flow?
7. Are the exit strategies clear?
   Can you liquidate easily, or is your capital locked?

Investing doesn’t have to be complicated. But it does have to be smart.

If you take the time to understand what you’re getting into—and whom you’re getting in with—you’ll drastically reduce your exposure to unexpected risk. And you’ll be much closer to what we’re all really after: Freedom.

Let that be your mantra going forward: Simplicity. Clarity. Income.

That’s the foundation of true wealth.

If you’re looking to simplify your investment strategies while expediting your timeline to retirement, exiting practice, or taking more time off…

I’m hosting my Free For Life Masterclass starting June 30th, where we show you how to build your roadmap to financial freedom in 2-3 years or less.

I’ll also be personally introducing my preferred deal operators within my community, where you can start applying these principles and put your money to work. You can learn more about the masterclass here.