Wikipedia defines due diligence as the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party.
While much is still unknown regarding the debacle associated with FTX, one thing is abundantly clear, there was an almost universal and appalling lack of due diligence. Investors should recognize that celebrity, and other endorsements, do not generally include much, if any, due diligence.
In building a portfolio, investors should make sure that they understand what they are buying, what the risks are and how to measure the risks against the potential rewards. This is not a simple undertaking and might benefit from consulting with an advisor(s). It might also make sense to recognize that some untested investment opportunities may be just plain beyond intelligent analysis.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA