Any one of us would love to be able to take what little money we have left after paying for our homes, food, family and clothing and invest in something that is guaranteed to turn a healthy profit in a short period of time with little risk. Only problem is, those situations are often scams that will have you worse off than you were when you began.
To help prevent investors from falling for investment scams, the folks at the NY Daily News have compiled this list of 10 warning signs to watch out for:
1. Expectation of High Profits: Dont’ be lured in by the temptation of a huge return. It could be a Ponzi scheme or a pump-and-dump stock fraud.
2. Low Risk: If someone tells you there’s no risk, or even minimal risk, you should begin to ask questions. And, says the News, “A con man may become impatient or even aggressive if the question of risk is raised, a sign to walk the other way.”
3. Urgency: Just like we wrote about with the oil spill cleanup scams, you should always be suspicious if someone is trying to rush you into an investment, especially an investment involving a significant amount of money. The more they push for your cash, the more you should sleep on it.
4. Confidence: Be wary of overly confident people offering investment opportunities. Often times, the intent of their swagger is to keep you from pulling out of the deal or asking questions.
5. Dressed for Success: Don’t be fooled by the trappings of wealth. Scammers like Bernie Madoff and Marc Dreier lived lavish lives from the money they scammed. Yes, part of that was just greed, but another purpose was to convince investors that they were giving their money to someone who knew what they were doing.
6. The Power of Referrals: Swindlers will be sure to find money to pay back initial, well-connected investors, with the intention of having these folks spread the word to their moneyed friends. Again, be wary of word of mouth and look into what you’re actually putting your money into.
7. Complex Investments: Writes the News: “The con artist loves to push poorly understood or little known products. These may be speculative inventions or any manner of official-looking or sounding investment vehicles. The favorites include gold bullion, offshore investments, private placements and even investments related to the foreign exchange.”
8. Resistance to Questions: As pointed out above, if the person or persons dodge, deflect or flat-out don’t answer your questions about the investment, your money would probably be better placed elsewhere.
9. No Third-Party Reviews: If you’re told there’s not enough time to have a third party look into the investment, or made to feel guilty or insecure about having another pair of eyes look it over, then it’s probably best to walk away.
10. Nothing in Writing: If they won’t put something in writing, then that means they don’t want a paper trail. Anyone afraid of having concrete evidence of the investment is not someone you should be dealing with.
In addition to the warning signs, the Daily News suggests doing the following to protect yourself
* Carefully check out the person and firm you would be dealing with.
* Take a close and cautious look at the investment offer itself and ask questions.
* Continue to monitor any investment that you decide to make.
10 signs you may be face-to-face with an investment fraud scam [NY Daily News]