Before I get into this post I'd like to make one thing clear...

Both Renate and myself have been on both sides of this situation. First, when we ran our first company, we offered friends/family the option to provide funding to us at an attractive interest rate (at the time 10%) and naturally we struggled to repay those funds but thankfully we did. Secondly, we also gave someone our money $1,500 USD to invest in Forex for us and provide quarterly returns. In this case, we weren't guaranteed a set amount but expectations were set and never met and in the end we never got back our principal only 1 quarterly payment. Both these situations have taught us humility and have shaped how we view this situation that has come to light.

Let me also say, we exercise compassion for the children, parents, teachers, the school and all related parties in this matter. In these situations, no one truly wins. 

Now to the lessons.

To the Parents who "invested" their savings with Phoenix.

1. Consult a financial advisor before making any investment decision

Getting advice from someone who knows how to evaluate investments, assess risk and provide scenarios as to both positive and negative outcomes is critical for all investment decisions. Chances are, this way the first investment of this size for some of these parents. Having been promised such attractive returns, speaking with someone who could have given guidance on what type of returns are realistic to expect based on the type of business, their level of income, their future plans, etc., would allow them to make an informed decision. They might have ultimately decided to do the same thing but in an informed way.

2. Have a process to evaluate the risk in an investment

All investments come with some element of risk, this includes both public and private companies. Private companies however have even more risk than public ones as they have not yet proven their model is scalable or have not yet gone through a governance process that public companies are required to complete before listing. Private investments aren't regulated in the same way a public company listed on the Jamaica Stock Exchange is regulated. This means the responsbility for assessing risk lies on the investor. 

A simple checklist for investing in a private company could include:

• Are there Audited Financials for the last 2 years?
• What controls are in place to ensure the company achieves its stated goals?
• Is this the first time raising capital for the company, is there a track record for good management of cash?
• What are the plans of the company? Are they feasible?
• What is the best possible outcome?
• What is the worst possible outcome?
• Conduct Due Diligence on the company (debtors, credit history, etc)

These steps can help to filter an investment or answer questions that can lead to an informed decision.

3. Setting Realistic Expectations for Returns

Is it realistic to expect a private school to pay interest of 20% per quarter on the principal? 

For comparison let's look at some other investments and how they performed in 2024. We will compare stocks, bonds, dividend stocks, Unit Trusts, etc.

Best Performing Stock (2024) - Blue Power grew 79% for the year, but if you zoom out for the last 3 years it only grew 34%

Best Performing Unit Trust (