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Tips For Avoid Online Investment Scams

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avoiding investing scams

Protecting yourself from investment scams can be difficult as they can be challenging to identify.

Online scams are increasing from push payment scams, where victims send money to scammers, to identity theft.  The money lost is in the billions.  In 2022 and 2023, Americans lost over $10 billion, and Australians lost $2.3 billion.

Large-scale scamming is apparently big business. UAE attracts scammers and money laundering on an industrial scale. The perpetrators are not primarily locals but offshore businesses operating across Southeast Asia.

Everyone is a potential target, whether you’re in the UK, USA, or somewhere else like Australia. However, several measures can be taken to safeguard your finances and avoid such scams.

Tips To Avoid Investment Scams

This business blog article has a few tips for you 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

Tip 1. Do your research

Before investing in anything, start with a plan. Your plan is your roadmap and should include your goals, information on the type of investments you will make, and the steps you take when presented with an investment opportunity.

Having decided which type of investments work with your risk profile, you’ll have a reasonable understanding of the industry. For example, if you’re interested in real estate, you’ll keep up with market trends in the locations that interest you.  What you’ll focus on most with your research will be the specifics of the investment.

Using the real estate opportunity, you’ll want to know the listing price and rental income rate to determine whether you can afford the property and whether the rent will cover your ongoing expenses, including maintenance, tax, home loan repayments, insurance, and management fees.

When you always assume the worst with an investment deal, if you are genuinely interested in it, for example, a stock, business, real estate, bond, or something else—you’ll enthusiastically research it.  What you won’t do is rush in and take unnecessary risks.

Tip 2. Be skeptical of high returns

If an investment promises exceptionally high returns with little to no risk, it is more likely to be a scam.

Remember the old adage: if it sounds too good to be true, it probably is. We all want to cut corners and take shortcuts to get the best returns quickly. This human trait allows scammers to succeed, i.e., ensure that you and your money part ways rapidly.

Scams always promise high returns with short investment periods.  For this reason, successful investors work very hard to know all they can about the investment type and the conditions that work for them.

Tip 3. Watch out for pressure tactics

Beware of scammers who use aggressive sales tactics to pressure you into making quick investments. They aim to prevent you from thinking about your decision or conducting proper research. Don’t be tricked. Take your time and make a well-informed choice.

If you suspect you have been targeted by an online investment scam, report it so the authorities can locate the scammers and shut down their operations.

Tip 4. Be wary of unsolicited offers

If you receive an unsolicited investment offer, be skeptical. Legitimate investment opportunities are rarely offered out of the blue. Follow your steps, especially researching the investment and who’s behind it.

Tip 5. 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 identify those tactics and avoid being scammed.

Tip 6. 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 investment decisions.

Tip 7. Online Security

Online security starts with you and your device, as well as 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.

Online security is a topic well covered on BusinessBlogs. See our security category for many articles on how to keep your identity and information secure.

Tip 8. Diversify

Avoid putting all your money into one type of investment or one stock. Putting all your eggs in one basket is a risky strategy. Many investors get stuck with one asset class because it’s the only investment they understand. The answer 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 include property, businesses, stocks, etc. Investing in companies and property is the stable of high-profile investors, and if it works for them, it should also work for you.

Tip 9. 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
  • Forex
  • Offshore investing
  • Charity investment scams
  • Fake Initial Coin Offerings (ICOs)

Investopedia has a list of the all-time stock scams, 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 wrongs. 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 (be sure to choose your ‘expert’ wisely) and do as they say.

Many people ignore their intuition, while others rely solely on it. Use it, but always exhaust all due diligence measures to ensure your investments are safe from scammers.