Updated:
Original:

How to Spot Investment Scams in 6 Simple Steps

Investment fraud criminals use a wide array of sophisticated and highly effective tactics to get people to part with their money. Learn how to spot those techniques -- and help protect not just yourself, but friends, neighbors, and family members.

Instructions

  • Step 1: Verify credentials Don't assume a salesperson is legitimate just because they have a fancy title or a corner office with framed certificates; fraudsters hope that if they look successful, you won't bother checking their credentials. Investment professionals -- like brokers, investment advisers, and insurance agents -- must be registered with regulators, such as the Financial Industry Regulatory Authority, the Securities and Exchange Commission, or your state securities or insurance regulator.
  • TIP: You can verify a salesperson's credentials at "SaveAndInvest.org":http://www.saveandinvest.org/.
  • Step 2: Be wary of "phantom riches" Be wary of an investment pitch that guarantees a certain return or promises spectacular profits -- what fraud-fighters call "phantom riches." No legitimate salesperson can make those kinds of promises. An ethical broker will admit that every investment involves risk.
  • Step 3: Ignore the "everyone is doing it" angle Don't be swayed by a seller's claim that everyone from their mother to their mechanic is in on the deal. A pitch that focuses on who and how many people are invested, rather than why the investment is sound, should be viewed with skepticism. And beware of "affinity fraud" -- investment scams that prey upon members of the same social circle, religious group, ethnic background, or other affiliation, such as servicemembers returning from deployments.
  • TIP: Contact your chain of command and/or Staff Judge Advocate if you suspect that you are being targeted in an investment fraud scheme.
  • Step 4: Refuse to be rushed Refuse to be rushed into anything. If the salesperson says it's a limited time offer, or that there's a limited supply of whatever's being peddled, consider it a red flag: the seller is attempting to make the investment look valuable by implying it's in scarce supply due to great demand.
  • Step 5: Never feel obligated Never feel obligated to make an investment because the seller gives you something free; salespeople count on those freebies to guilt you into reciprocating.
  • Step 6: Arm yourself with information Further educate yourself about fraud tactics so you can protect yourself and your loved ones. Go to "SaveAndInvest.org":http://www.saveandinvest.org/ for more information, including the free Outsmarting Investment Fraud tool kit and documentary -- because knowing how to recognize investment fraud red flags is the best way to avoid falling victim to them.
  • FACT: Investment fraud victims are more likely to be male, live with one or more people, be married, earn more than $30,000 per year, and have at least a college degree.

You Will Need

  • Computer or telephone
  • Skepticism

Popular Categories