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Investment fraud happens more frequently than you might think. The latest Federal Trade Commission (FTC) data shows that consumers filed over 1.8 million fraud reports, resulting in a total loss of over $8.6 million through Nov. 8, 2024.
Financial losses like these are devastating. Unfortunately, investment scammers continually prey on unsuspecting people who fall for cunning and deceptive financial opportunities.
To protect yourself, watch out for these red flags that can help you identify fraudulent investments — plus, here are some trustworthy investments to try instead.
Promises of Big Money and Guaranteed Income or Returns
Scammers often promise “big money,” “guaranteed income.” or “instant returns.” A good rule of thumb is if it seems too good to be true, it probably is. Fraudsters use many tactics, including many popular social media platforms, to draw victims into some kind of investment plan to amass a lot of wealth. Common bogus investment opportunities include:
- Real estate investment scams: Someone might offer a sales pitch through emails, phone calls, social media posts, or billboards. They might talk about huge returns on investing in “world-class” property development. Avoid these suspect, risky cold calls.
- Real estate training scams: These bad actors claim they will “coach” you to find real estate investment success. They may also claim many program participants have already achieved it. The “training” is often minimal and may never produce results.
- Cryptocurrency investment scams: Scammers will use social media, emails, and even dating websites to show you how “they” made lots of money investing in cryptocurrencies. They often tell you to invest money via a particular app or digital platform, dangling the promise of “free training.” The terrible thing is, once you send them money, con artists often shut down the app or website, take your money, and run.
- Investment training scams: These involve false promises to teach you a “proven,” “patented,” or “fail-safe” method to invest in financial products and markets. They may also offer jaw-dropping testimonials from “students” who followed the “system” and now have fancy homes, cars, and other types of wealth. Unfortunately, many of these testimonials are atypical results that most “students” never see.
- Precious metal and coin investment scams: Fraudulent “rare coins merchants” or “precious metal dealers” may promise huge returns on investments in coins, gold, bullion, and other precious metals. Many of these “dealers” are inexperienced and just want to lure naïve investors, take their money, and disappear. Learn more about the dangers to avoid via the Commodities Futures Trading Commission.
High-Pressure Sales Pitches
If someone tells you that you “have to act now,” or you’ll lose the opportunity, or they don’t allow you to research their claims and investments, don’t fall for it. High-pressure sales pitches for any type of investment are huge red flags. These claims can include phrases like “limited opportunities,” “limited training or webinar space,” and “send money now” so “you don’t miss” this fantastic offer. Don’t succumb to these bogus tactics.
No-Risk, Secret Investment Systems with Few Details
It is likely a scam if someone touts a no-risk or small-risk investment opportunity that requires minimal effort. Or if they offer a “secret system,” or a tried-and-true way to earn loads of money quickly — and don’t offer many details — these are also red flags that something is wrong and potentially fraudulent.
Overly Nice Stranger or Someone Who Pushes You to Join Other Investors
Just because a total stranger seems nice, compassionate, or empathetic doesn’t mean you should immediately trust them with your money. Always check out a person’s credentials and qualifications.
Plus, you should be wary of someone who pushes you to join the crowd of investors in a particular opportunity because “everyone else is doing it,” or it’s a hot and trendy investment. Again, no one should pressure you to jump on the bandwagon when it comes to your money. Always take time to validate and confirm claims about financial returns for any investment product.
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Investment Fraud Prevention Tips
The U.S. Securities and Exchange Commission (SEC) offers some valuable tips to protect yourself from investment fraud.
- Ask questions and research before investing. Don’t immediately take a stranger at their word. Ask questions and do your own research before investing with anyone. Get to know a company’s products and services and look at a company’s financial statements on EDGAR.
- Know the salesperson. It’s wise to research the person who contacts you about an investment — even if you casually know them and especially if they’re strangers. You can check out the disciplinary history of brokers and advisers for free using the SEC’s and FINRA’s online databases. Your state securities regulator may have additional information.
- Beware of unsolicited opportunities. Always beware of unsolicited investment opportunities, especially foreign and “offshore” investments. Do extensive research before committing any funds to unknown agents, brokers, or companies.
Trustworthy Investments
Many trustworthy investment opportunities do exist. Always consult a reputable financial advisor before investing.
U.S. Treasury bills, notes, and bonds, money market mutual funds, treasury inflation-protected securities (TIPS), high-yield savings accounts, and Series I Savings Bonds are some of the products Forbes Advisor recommends.
Recognizing red flags, asking questions, researching opportunities, and targeting safe financial products will help you avoid investment fraud and protect your money.
The post How to Spot Red Flags for Fraudulent Investment Opportunities appeared first on AFRO American Newspapers.
