Avoiding Investment Scams

Every year, people lose millions of dollars to scams of every size and kind. Investment scams are particularly dangerous because they come in many forms, from an unexpected phone call to a message through an online professional network, and the creativity of a scammer has no boundaries.

Scammers will typically operate from overseas or offer offshore investments. In order to appear legitimate, some will use highly sophisticated websites or publish bogus press releases that make false claims of outstanding company performance. Scammers will often appear to be friendly, likable and professional. They are skillful at using aggressive sales techniques with the prime objective to make you feel compelled to close the deal and send your money to them. Most victims tell of scammers calling them endlessly with false promises of wealth or opportunities lost if they do not take up the offer.

Fortunately, most scams are avoidable. First, keep in mind that there are few get-rich-quick schemes—the only people who get rich in these too-good-to-be-true investment offers are the scammers themselves. Next, follow these six practical tips to avoid investment scams:

1. Take your time to decide. Do not let anyone pressure you into making hasty decisions about investments that you could regret later. Always take your time in making a decision. Legitimate companies should not pressure you to make a quick decision. Also, remember that no investment is risk free, including real estate investments, so do not part with your hard-earned money unless you understand all the risks involved. That takes time.

2. Conduct research. Do your own research on the company that is making the investment proposition. Do not rely solely on information the investment company says about itself. Make all investment decisions based upon independent research and objective professional advice. Also, keep in mind that any investment in overseas companies can be risky. For this reason alone it is advisable to always be skeptical of “off-shore” or foreign investment proposals.

3. Check authenticity of all correspondence. You may receive several types of scam letters ranging from bogus invoice-like letters to forged letters from a tax office or bank. But, unfortunately, not everything you receive in writing is true. To avoid being scammed, you must be on the alert and have systems in place to check the authenticity of all such correspondence you receive.

4. Protect your information. You may be asked by scammers to provide your name, date of birth and/or social security number to confirm your identity. Do not give your personal information to confirm your identity to any party, ever, until you are very sure it is a legitimate request. You must be very careful with your bank information or your credit card details. Even if a transaction appears to be low risk, once you hand over your information, you are vulnerable to the scammer and to general identity theft.

5. Seek independent advice. Do not rely on advice from the person trying to sell you the investment. Always seek independent financial and legal advice before making any investment decision. Investment decisions should only be made after much consideration, and most importantly, after conducting your own due diligence.

6. Report a scam. If you have been approached about an investment which doesn’t seem right, you need to report the scam. If you fall victim of a scam, or if you have invested money and now realize it is a scam, you must file a complaint and seek legal advice immediately. You should also spread the word to your friends and family to protect them.

In conclusion, always be very wary of investments promising a high return with little or no risk. If it looks too good to be true—it probably is. When you take part in an investment scam, you will probably lose a lot of money and may end up in considerable debt. Finally, remember that for scammers, every person is a potential target, including you.

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