4 Ways to Avoid Stock and Investing Scams

By Andy Hayes

The investing and personal finance industry is prone to scams just like any other industry.  Although you think people would be more careful with investments than anything else, early stage investors are taken by scams every day.  Smart investors move forward thoughtfullynever make a rash decision on investing.

Here are 4 ways to check yourself and avoid any spam and scams when it comes to investing.

1. Look for reviews.

It’s the digital era, and if you aren’t taking 5 minutes to do some Google research, you’re making a mistake.  Anyone making a recommendation to you for a potential investment — whether it’s real estate, bonds, stocks, or a mutual fund, if you can’t find any solid review or mention of it elsewhere, that’s a red flag.  Legitimate offers usually boast their independent reviews from the rooftops.

2. Be wary of any “guaranteed” returns.

When it comes to investing, very little is ‘guaranteed.’  Even if a bank promises you x% on your savings, if you read the paperwork you’ll probably note the rate could change, or fees might apply on top of your return.   Real estate prices are not guaranteed to go up.  Stocks, while overall always end up higher than before, are not guaranteed to go up in any specific time period.

3. If it’s too complicated, it’s not for you.

This is a real irritation for me; financial advisors and the like have a responsibility, in my opinion, to explain anything they recommend.  The same goes for the bank – if they want you to setup any sort of savings account offering they have, they should have no problem sitting down to explain it to you.  You have the right to ask for documentation and help and you should ask for it – do not ever put money into something or sign a document you don’t understand.  Ask and ask again until it’s clear.  And if you still don’t get it, it’s too complicated for you.

4. If it looks too good to be true, it probably is.

Last but certainly not least, this old gem of advice is the prefer check-in for any potential stock investment.  Most good, solid investments require a  wait to get a good return, and require you to either put a good sum of money down or deposit in smaller amounts regularly (Betterment is a good example of the latter).  If you’re being promised something that seems impossible, it more than likely is impossible.  See #1 and check to be sure.

 

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