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  3. How to look for warning signs

How to look for warning signs

While there's no guaranteed way to spot losses in advance, there are warning signs that an investment may be heading downhill.

Defaults on paymentsyour investment provider (including any company you have purchased bonds in) may delay or stop making payments due to you.

Consistent under performance – while occasional under-performance is normal, if your investment is consistently underperforming, you should compare its return to other similar investments.

Accounting problemsMistakes, delays, audit qualifications and controversy over accounts can all be warning signs. Accounting rules can be complex and genuine errors or differences in views do occur, but repeated issues may indicate deeper problems.

Management problemsDirector and senior management in-fighting, resignations, breaches of the law or unethical conduct can be warning signs. Changes in management may be necessary, but it could distract the management's attention from running the business.

Over-promising and under-deliveringWhile even the best managers can make mistakes,  lack of communication and falling service standards may point to something being seriously wrong.