Warning Signs of Investment Scams

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Warning Signs of Investment Scams
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What’s behind the continuing lure of Ponzi schemes? I think it’s that we want to believe the path to El Dorado is easy. It’s an oversimplification to say it’s all just about greed; it’s really that we want things to be easy, we want that one answer that creates financial freedom in our lives.

The pitch for a Ponzi can come in many guises. It could be somebody who says they have a company involved in digital interactive ads for nightclubs that was about to be sold to Microsoft. That one got actors Danny Glover and Harry Belafonte and also took down a longrunning charitable organization.

A recent study from the Financial Industry Regulatory Authority found that 40% of investors can’t spot the basic red flags of a fraud.

Beware of these warning signs of scams

Any time you hear the phrase ‘This business is going to hit big time and be sold to so and so’ or ‘rumor is they’re going to be acquired by so and so,’ you know that’s a warning sign.

Or in another example, the pitch could be someone promising churchgoers that they can make money funding church building projects. So often, these crimes have an affinity fraud angle. People believe people that they associate with, or that share their same religious belief, race, or profession.

One scheme like this targeted at black churches would first attract the ministers. When the ministers started making money, they would then tell the deacons or other members of the church. The ministers weren’t scamming their members; they actually thought they were investing in the real deal.

Here’s what you need to know: When somebody promises great returns on your money, and that they’re the ones who have figured out a secret way to do it, well, be skeptical. Another thing to be wary of is investments that are supposedly “fully guaranteed.” There is no such thing in the world of investing. Some insurance companies may tell you there is, but it’s not as clear cut as it seems.

Ask yourself this: If they’re really making those great returns they promise, why do they need me? They should have more than enough money on their own. The answer is that they don’t need you, it’s just a ruse.

So just because somebody is like us and has the same profession, religion or race, what really matters is the following: Is there a real business there? In many cases, it’s no way, not any day.

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Clark Howard About the author:
Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. More about Clark
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