How to Spot an Investment Scam

Jun 17, 2017 by

Losing money in an investment because of fluctuating market values is understandable, but losing money because of the investment’s fraudulent nature is just unacceptable. You don’t deserve to lose your money just because some company or individual has deceived you, but things like this happen all the time.

The best way to avoid investment scams is knowing how to spot one. Here are some of the traits most common among fraudulent investments.

Company is not registered

Don’t be shy to ask the company of its necessary documents to prove its legitimacy, such as registrations and licenses. A legitimate company will have nothing to hide, especially if it is trying to persuade you to invest, so if a company is often making excuses not to show you documents, stay away.

Salesperson is not licensed

You should investigate the legitimacy of not just the company, but also the person who is trying to get you to invest in that company. This person should be properly registered and officially licensed to sell the commodity. Be particularly wary of salespersons who desperately try to illustrate their success, because they are usually using this as a mask to their illegitimacy.

But not because the salesperson is licensed you are already safe. The website of Erez Law has mentioned several examples on how registered brokers can be malicious and negligent.

Salesperson is being too vague or too technical

Aside from the legitimacy of both company and salesperson, you should also know the nature of the investment and how you can get returns. If you don’t know these things, you can be an easy target for investment scams. Be wary if a salesperson is not giving you access to important information, either by being too vague or being too technical.

Returns are promised to be high and risks low

When it comes to investing, there is no such thing as easy money. If you want high returns, you need to go through equally high risks. If the investment pitch is too good to be true, like if it is making promises of high returns despite the minimal risks, you should be cautious. It is probably just trying to lure you in with false hopes.


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