Investment Bonds

[Meu02189]

Hi. Newbie here looking for some friendly advice please.

I've been offered the chance to invest in a small local (new) construction company. The idea is to invest a sum of £5000, which the company then invest in bonds, with the MD guaranteeing a return of either 50% (plus investment) after 3 years or 100% (plus investment) after 5 years.

Surely this sounds too good to be true?

Has anyone else heard of such a scheme? What are the likely problems and pitfalls? How can such guarantees be made?


Thanks in advance.

 

[Alpha]

Very first thought is that it is a con!!

Why would a 'construction company' be investing in bonds(This would then make it an investment company)

What do you receive in return for your investment? A number of shares in the company?

1) No one can gurantee a return of 50% or 100% after 3/5 years, If they could you would simply borrow the money from a bank (who having looked at the guaranteed return would of course rush to give you all the funding you require!!!)

If it the case that you are going to be given shares in return for your investment, the shares could be worthless after three years. They could also be very difficult to sell.

If you really want to pursue this I would be inclined to ask very specific questions as to the business plan and how they will be able to generate the funds to give you this return. Then make your own enquiries into the validity of the investments that they will be choosing (an IFA would be able to help out with these)

 

[Ozzy]

I would agree with Alan. If something ssounds too good to be true, it usually is.