Investment scams: distinguishing between fact and fiction
Being optimistic about increasing your assets and financial wealth is normal.
However, being overly optimistic can have its downfalls and make you vulnerable to becoming a victim of an investment scam. There are a number of scams plaguing investors that offer low-risk, high-return investments. Itís an impossible combination, and it costs Americans dearly each year.
Most famously, Bernie Madoff was able to attract clients to invest in a Ponzi scheme for decades that defrauded his clients of billions of dollars and left many formerly well-to-do families in financial ruin.
Although Madoff will spend the rest of his life behind bars, there are plenty of crooks ready to take his place, eager to snag your hard-earned money however they can. Today, one of the more efficient and cheapest vehicles for scammers to reach a broad audience is through the Internet. Anyone can build a website or write an online investment newsletter to make messages seem real and credible.
By following a few important guidelines, you can help minimize your chances of becoming a victim of an investment scam.
Beware of unlicensed individuals selling securities. To verify whether a person is licensed to sell securities, call your state securities regulator. If theyíre not registered, donít invest.
Be wary of investments that offer high returns with minimal risk. Know the risk before you invest. Typically, investments that offer the greatest return are also the most risky.
Understand your investments. Donít take anything for granted and do your homework. A good place to start is with a licensed financial advisor or your state securities regulator. Other sources include the Securities and Exchange Commission and the North American Securities Administrators Association.
Be cautious when following investment advice via the Internet. Individuals use the Internet to ďpump and dumpĒ stocks they tout in chat rooms and mass emails. Some states have Internet surveillance programs that watch for fraud or investigate investor complaints.
Donít agree to anything immediately. Individuals may try to pressure you into making an impulse decision because the opportunity wonít be around long. Pressure to act immediately is almost always a red flag for fraud.
If an investment seems too good to be true, it probably is. Do your own due diligence and protect yourself from being caught in an investment scam. It will benefit you and others who could fall prey.