Investment scams can be difficult to spot, but there are some steps you can take to protect yourself from them.
Avoid Investment Scams
This business blog has a few tips on how to avoid investment scams, including:
- Planning ahead
- Be skeptical of too-good deals
- Avoid buy-pressure tactics
- Know the red flags
- Know your limit
Do your research
Before investing in anything, start with a plan. Your plan is your road map and it should include the steps you take to invest successfully.
One step is to do thorough research. Always assume the worst and be proven otherwise. Research on the investment opportunity, the company or individual offering it, and their history. Check their credentials and background, read reviews, and ask for references.
Be skeptical of high returns
If an investment promises extremely high returns with little to no risk, it’s likely a scam. Remember the old adage: if it sounds too good to be true, it probably is. We all want to cut corners and get the best returns quickly. Scams always promise high returns and short investment periods.
Watch out for pressure tactics
Scammers often use high-pressure sales tactics to get you to invest quickly. Their aim is to get you to act quickly without giving you time to think about the decision or do your research. Don’t fall for it. Take your time and make an informed decision.
Be wary of unsolicited offers
If you receive an unsolicited investment offer, be skeptical. Legitimate investment opportunities are rarely offered out of the blue. Go through your steps especially researching on the investment and who’s behind it.
Know the red flags
Knowing the tell-tale signs that something is amiss with the investment will help protect you and your money. Some common red flags for investment scams include:
- Promises of guaranteed returns
- Unregistered investments
- Unlicensed salespeople
Be on the lookout for these warning signs and read up on how other people have been scammed so you can be on the look out for those tactics so they are not used on you.
Only invest what you can afford to lose
Finally, only invest money that you can afford to lose. While there is always some risk involved in investing, you can minimize that risk by only investing money you don’t need for your basic needs.
By taking these steps, you can protect yourself from investment scams and make informed decisions about your investments.
Online security starts with you and your device, Internet access, and password security. Make sure you’re not accidentally allowing malware to infect your computer. Run antivirus scans and always apply software updates.
Avoid putting all your money into one type of investment or one stock. All your eggs in one basket is a risky strategy. Many investors get stuck with one asset class as it’s the only investment they understand. The answer here is to learn more about different asset classes and types of investments. Learn about investing online, join discussion forums, read articles, and follow investors like Warren Buffet.
Spreading the risk prevents you from losing everything you’ve invested if a stock goes sour or there is a stock market crash, and all you had were stocks.
When you are well diversified, your assets will include property, businesses, stocks, etc. Investing in businesses and property is the stable of high profile investors, and if it works for them, it should also work for you.
Have an Emergency Plan
Nobody wants to think about something going wrong with their business investments. But, as we have discussed, there is always a risk with everything you do, including leaving your money in the bank. Doing nothing with your money includes leaving it in a very low interest account and some investors say that action is risky insofar as it may give you a negative return if interest rates are negative.
Types of Investment Scams
With next to no positive return on money left in banks, investors are taking risks with investments they have no prior experience with nor the knowledge to make the right calls.
When you’re inexperienced, you’re a target for scammers. For instance, scams can look very legitimate and lure you in. Before you know what has happened, they have scammed you out of a lot of money. Common investment types that are used for scams include:
- Ponzi or Pyramid
- Offshore investing
Investopedia has a list of the all-time stock scams so far, and there will be more.
However, even the most astute investors can get caught out, so if this happens, you need an emergency plan and experts to get you through it. Internet fraud is big business, and a sector is specialized in working with victims to correct the wrong. Many victims assume their money is gone when they are scammed and never get it back. But this is not always true. You must do whatever you can to get your money returned to you.
Criminals do get caught (eventually), and their assets are liquidated. Even cybercriminals get caught, and you can ensure you’re not a soft target, too by ensuring your devices and computers are secure with strong passwords and MFA. Your software and apps are up to date.
Be Sensible and Trust Your Gut
The number one thing you can do when thinking about your business investments is to be sensible. Do not make any quick and rushed decisions.
Take your time with your next move. Listen to the experts and do as they do. Many people ignore their intuition, while others rely solely on it. Do neither use it but always exhaust all measures mentioned in this article to ensure your investment decision works for you and your business.