Scammers are on the prowl. While we research investing opportunities, they are scheming new ways to take our hard-earned money away from us. We work hard and want to put our money into an investment that works for us, but then some grifter or online scammer makes promises that sweep us off our feet and right into giving them the money we plan to invest. Investment scams can be challenging to spot, but there are signs you can look out for to help avoid them. Read more for five tips on how to avoid being scammed by investment scams.
- Research the investment opportunity- do your research thoroughly before investing your money. Check on the credentials of the company and all the people involved in the investment, look for complaints and negative reviews online. Check their licensing and registration and if the investment opportunity and the people offering it are licensed and registered with appropriate regulatory authorities. This can help ensure that the investment is legitimate. Information is public, so look for whatever you can find.
- Avoid high-pressure sales tactics and be wary of anyone who tries to pressure you into investing quickly. Anyone who insists on moving forward without giving you time to think it over could be a scammer. Scammers often use high-pressure tactics to get people to invest before they have time to investigate the opportunity. This is a sure sign; tell them nope- you need to take time and talk to advisors about it. A scammer will get the hint and move on.
- Be skeptical of promises of high returns; if an investment opportunity promises unusually high returns with little or no risk, it’s probably too good to be true. Remember, no investment is entirely risk-free.
- Avoid investments that are not transparent; if you don’t understand the asset or the company’s business model, or if they are not transparent about how they plan to use your money, it’s probably a scam. Ask for business plans, examples of past projects, and case studies to help you understand. Warren Buffett often says he sticks to investing in what he understands; getting into something you don’t understand is tough. You don’t know or have the resources to figure it out.
- Get a second opinion before investing your money. Hire the advice of a financial advisor or lawyer who can review the investment opportunity and help you make an informed decision. If you don’t have either of these, make some calls to find the right fit for you. It’s essential to spend the extra money upfront to protect yourself from potential problems in the future. Several people I’ve known have been scammed, and each one of them didn’t mention the investment opportunity to anyone. Not their friends, family, or advisors before handing over large amounts of money to a scammer. Sometimes we hesitate to share what we think is a great opportunity because there are nay-sayers in our midst, but not everyone is pessimistic. Find someone you know is an investor and ask them what they think. Get a complete perspective before handing out your hard-earned money.
Suppose it sounds too good to be true. In that case, be cautious and diligent when considering any investment opportunity, and feel free to walk away if you feel uncomfortable or suspicious about the offer.
There are several websites you can use to research investment scams.
Securities and Exchange Commission (SEC) – The SEC maintains a database of enforcement actions and investor alerts on their website. You can search for information on specific companies or individuals or browse their recent enforcement actions and investor alerts list.
Financial Industry Regulatory Authority (FINRA) is a regulatory organization that oversees the securities industry. Their website includes a database of disciplinary actions, investor alerts, and a tool to check the registration status of brokers and investment advisors.
Better Business Bureau (BBB) – They maintain a database of businesses, including investment companies, and assign them a rating based on customer reviews and complaints. You can search for a company’s rating and read customer reviews on the BBB website.
Consumer Financial Protection Bureau (CFPB) – This is a federal agency that regulates financial products and services. Its website includes information on financial scams and how to protect yourself from fraud.
Google and social media – You can also use search engines and social media to research investment scams. Look for news articles, customer reviews, and discussions on forums and social media platforms. Look up all the names of the people involved and see what they have done in the past to ensure they have a good reputation. It will take some time to do the additional research, but it’s much better to research before investing than look for someone after they have taken your money. I have a friend who made this mistake with her life savings and an investment into a man she thought was her friend. She spent two years trying to find him with the FBI, but nothing came of it, and she didn’t get any of her money back. Do the research now before you invest. Subscribe for more business, sales, and investing posts, have a lovely day.
