How to spot a bad investor: certainty, narrative, and red flags you should not ignore

The investor who tries to persuade others by displaying excessive certainty about a position or about the future necessarily falls into one of two categories: either an enthusiastic idiot who does not understand risk, or a fraudster who deliberately hides it.

This kind of certainty is not a virtue, it is a warning sign. Markets are not deterministic systems and charts are not crystal balls. Intelligent investing does not consist in predicting the future, but in recognizing uncertainty, considering a broad set of plausible scenarios for each position, and structuring the portfolio to survive as many of them as possible.

From this perspective, the truly intelligent investor is deeply pessimistic and cautious: they start from the assumption that everything can go wrong and prepare accordingly. If capital grows consistently, it is not due to optimism or predictive skill, but because everything reasonably possible has been done to avoid losing money.

This approach also introduces a clear validation criterion. A non-fraudulent investor is not validated by what they say nor by the sophistication of their arguments, but by the results they have achieved and by their willingness to show them through public and auditable data. When performance cannot be examined and only discourse remains, what exists is not investment, but narrative.

Consistent with this, an ethical and trustworthy investor will never say “do the same as I do”. They will say: “this is my perspective; consider others on your own and make your own decisions”. Trust is not demanded through certainty; it is built through honesty about risk.

Red flags for detecting bad investors

Based on this framework, it is possible to identify a series of clear warning signs. These are not opinions or moral judgments, but observable patterns that recur in incompetent, irresponsible, or outright fraudulent investors.

A single red flag may not be conclusive. Several together, however, form a pattern that is difficult to ignore. Below is a comprehensive list to help you protect yourself from such predators.

1. Red flags in discourse and communication

• 🚩 Speaks in terms of absolute certainty (“it will happen”, “it is safe”, “it cannot fail”).
• 🚩 Uses deterministic language to describe inherently probabilistic markets.
• 🚩 Confuses personal conviction with objective certainty.
• 🚩 Sells simple narratives for complex phenomena.
• 🚩 Uses phrases like “this time is different” without structural justification.
• 🚩 Appeals to personal authority instead of arguments.
• 🚩 Ridicules adverse scenarios instead of analyzing them.
• 🚩 Reacts with hostility when questioned about risk.
• 🚩 Avoids discussing drawdowns, losses, or negative scenarios.
• 🚩 Talks far more about potential gains than possible losses.
• 🚩 Uses technical jargon as decoration rather than as an explanatory tool.
• 🚩 Confuses storytelling with analysis.
• 🚩 Promises emotional comfort instead of structural resilience.

2. Red flags in risk management

• 🚩 Promotes all-in positions or extreme concentration as a strategy.
• 🚩 Cannot explain why a position might fail.
• 🚩 Does not define loss scenarios before investing.
• 🚩 Has no clear position-sizing rules.
• 🚩 Does not distinguish risk from volatility.
• 🚩 Confuses diversification with the number of assets.
• 🚩 Does not consider correlations between positions.
• 🚩 Lacks clear exit criteria.
• 🚩 Adjusts rules after losses to justify mistakes.
• 🚩 Increases risk after losses to “recover”.
• 🚩 Reduces protection when things are going well.
• 🚩 Ignores tail risks.
• 🚩 Assumes infinite liquidity.
• 🚩 Does not consider regulatory, operational, or counterparty risk.
• 🚩 Bases decisions on a single variable.
• 🚩 Designs portfolios that only work in a single market regime.

3. Empirical and evidence-based red flags

• 🚩 Does not show verifiable historical results.
• 🚩 Only displays winning trades.
• 🚩 Hides bad periods by changing the narrative.
• 🚩 Changes the time frame to look better.
• 🚩 Does not adjust results for risk.
• 🚩 Confuses gross returns with real returns.
• 🚩 Does not distinguish luck from skill.
• 🚩 Refuses external audits or independent review.
• 🚩 Publishes isolated screenshots instead of full performance series.
• 🚩 Cannot explain their worst year.
• 🚩 Deletes old content that reflects poorly on them.
• 🚩 Validates themselves through followers and likes rather than data.
• 🚩 Changes strategy without explicitly acknowledging it.

4. Ethical and incentive-related red flags

• 🚩 Explicitly says “do the same as I do”.
• 🚩 Earns more from followers than from investing.
• 🚩 Does not align incentives with those who follow them.
• 🚩 Makes money regardless of others’ outcomes.
• 🚩 Minimizes responsibility toward their audience.
• 🚩 Uses FOMO as a core tool.
• 🚩 Avoids real risk disclaimers.
• 🚩 Sells “privileged” access without explaining its value.
• 🚩 Monetizes certainty.
• 🚩 Justifies bad practices with “everyone is responsible for themselves”.
• 🚩 Does not distinguish education from recommendation.
• 🚩 Presents opinions as facts.

5. Psychological and behavioral red flags

• 🚩 Confuses self-esteem with financial performance.
• 🚩 Needs to be right publicly.
• 🚩 Does not admit mistakes.
• 🚩 Changes opinions without acknowledging it.
• 🚩 Becomes emotionally attached to positions.
• 🚩 Interprets criticism as personal attacks.
• 🚩 Trades to prove something, not to survive.
• 🚩 Measures success through external validation.
• 🚩 Avoids saying “I don’t know”.
• 🚩 Seeks adrenaline rather than asymmetry.
• 🚩 Believes control and prediction are the same thing.

6. Structural and systemic red flags

• 🚩 Strategies that only work in bull markets.
• 🚩 Models that do not account for discontinuities.
• 🚩 Excessive dependence on a single input.
• 🚩 Unstated assumptions.
• 🚩 Lack of stress testing.
• 🚩 Does not distinguish signal from noise.
• 🚩 Excessive optimization of the past.
• 🚩 Ignores friction costs.
• 🚩 Does not consider taxes or regulation.
• 🚩 Assumes permanent institutional stability.
• 🚩 Has no plan for extreme events.
• 🚩 Does not prioritize survival.

Conclusion

A bad investor is not defined by losing money. They are defined by not understanding why they might lose it, not preparing for that possibility, and worse still, dragging others along through false certainty.

When discourse replaces evidence and certainty replaces risk management, what remains is not investment. It is narrative.