Investors who are looking for avenues to generate extra income on the side are at serious risk for being taken advantage of. There are some lucrative businesses that will pay off in aces but the trick is wading through the myriads of investment scams to get to the good ones. Con artists are becoming more sophisticated in presenting bogus money making schemes that appear to be on the up and up. Investment fraud is on the rise and it’s getting more difficult to sort the legitimate opportunities from the flim flams.
We’ve noticed that as soon as a scam is targeted for exposure, the artists address the details that are used to debunk them with some fairly ingenious tricks to cover their bases. This makes it more difficult to research claims made and supply firm proof of a scam. In order to address this growing problem, we’ve come up with some ideas and strategies that can help you to safeguard against becoming the victim of an investment scam. By following a few simple guidelines and staying on your guard you will reduce your risk of losing money in bad investments that are designed to part you and your hard earned cash.
Here are ten ways to protect yourself from an investment scam.
1. Do your research
Before you invest, find out everything that you can about the company. Check out their press releases, message boards and then go to another venue for confirming the accuracy of the postings. EDGAR is a good resource for checking out investment opportunities to confirm their legitimacy. This venue will allow you to further investigate their financial statements.
2. Confirm broker reputations
It is important to validate any claims that are listed on broker websites. A professional investment advisor or broker should be registered and they should have a verifiable reputation for being honest and providing excellence in their servicing. There should be minimal complaints and the broker should have a high degree of transparency. Some of the better brokers offer a disclaimer that provides the risks involved with investing. Find out if the brokers have been disciplined with the SEC and FINRA databases which are provided online for your convenience.
3. Investigate the securities regulator for your state
They may have more information on the brokers that are affiliated with programs you’re considering for investment. This is a resource that can provide you with any complaints lodged and well as other information.
4. Confirm licensing
If you are considering investing in securities, it’s a good idea to make sure that the sales persons are licensed to conduct these transactions. Even if they appear to be top notch in their presentation, it’s not a good idea to deal with unlicensed sales staff. Find out if there have been any reported issues with the salesperson themselves or the company that they represent.
5. If it sounds too good to be true it is
This is a rule of thumb that every investor should follow. There is no such thing as instant wealth or getting rich quick with little to no effort. We’ve seen this scam played out over and over again with binary options trading software scams. The presenters guarantee that the software is fail proof and will generate instant wealth with a nominal investment as seed for trading. Some of them sound plausible but the experts in the market will tell you that binary options trading always comes with a risk of loss. Don’t be taken in by promises of great wealth that are guaranteed. Instead let the word “guarantee” signal a red flag of danger.
6. Ask questions
If the company that you’re considering for investment does not allow a venue for face to face dialogue, it’s not likely to be a good investment venue. Fraudsters will dance around the topic without giving you straight answers or they will tell you a lie. Find out how the claims that they make are backed up with solid evidence that satisfies your curiosity. In addition to asking questions, follow up with the research to verify that the answers given are true. If you cannot verify the accuracy of the claims, the company either has not done a good job in achieving transparency or they are not legitimate.
7. Avoid succumbing to pressure
It is the slick tongued devil that will use the pressure strategy to secure investment funds. Any program that demands instant action on your part is one that you should probably walk away from. Don’t fall for the limited time of just one hundred participants allowed scheme. Some sites even show a countdown that suggests that time is running out to join as a member. Move on to the next option.
8. Find out who the owners of the company are
Generally, fraudulent companies are created by owners who hide their identities to avoid prosecution and embarrassment. Conduct a thorough research of the company, how long it has been in business, who the founders are and how well it has been doing since its establishment.
9. Confirm a physical address and valid contact information
More reputable companies will have a physical address, even if they offer investment opportunities online. If there is no transparency with regard to location, mailing address, fax, telephone number or email address there is reason for suspicion. More than half of the so called investment companies do not even actually exist outside of their websites that are set up to lure you in.
10. Confirm length of time in business
While some may argue that there are plenty of new investment firms that are legit and offer great investment opportunities, there are more new scams that are here today and gone tomorrow, sadly, with your money in their pockets. The longer an investment firm has been in business, the better. This means that they are still conducting business and are delivering services that people appreciate for return transactions. Scams come and go but solid businesses that have been around a while have established some type of a reputation that makes it easier to confirm their track record and what others have to say about their experiences with them.
There are several good ways to prevent being taken for a ride when making investments. Several decent opportunities are out there. It just takes a little forethought to know which options are best and which should be avoided. Most investments opportunities come with a risk and this fact should be explained by the company you’re considering. If you follow these ten simple recommendations you’ll lessen your risk of becoming the victim of investment fraud.