Protect Your Money
The Fraud Research Center estimates that Americans lose $40-$50 Billion dollars to fraud every single year, and up to 17% of the adult population falls victim to some form of financial fraud in a given year.
Most of us believe that we’re too smart to fall prey to financial fraud, but successful fraudsters trick smart people out of their money by offering incentives that are just good enough to be true.
In fact, the typical investment fraud victim isn’t who you would think― wealthy, risk-taking and educated males were ranked most likely to fall victim to investment fraud and scams in a recent study conducted by the Fraud Research Center.
A key takeaway is that when it comes to investing, it pays to do research.
How to Spot an Investment Scam in 6 Steps
Financial fraudsters use sophisticated and effective tactics to get people to part with their money.
Here are six steps you can take to help you spot an investment scam.
1. Verify credentials. Don't fall for a fancy title or other trappings of success. Fraudsters hope that if they look successful, you won't bother checking their credentials. Investment professionals must register with FINRA, the Securities and Exchange Commission or your state securities or insurance regulator. You can use FINRA BrokerCheck, a free online tool to get information on brokers and investment advisers.
2. Don't chase "phantom riches." Be skeptical of investment pitches that guarantee a certain return or promise spectacular profits. They are what fraud-fighters call "phantom riches" that you will never see. No salesperson can make those kinds of promises. The reality is that every investment involves risk.
3. Ignore the "everyone is doing it" story. Don't believe claims that "everyone" is in on the deal. Be wary of a sales pitch that focuses on how many people are investing, without telling you why the investment is sound. Remember, affinity frauds are scams that prey upon members of the same social circle, religious group or ethnic background.
4. Refuse to be rushed. If the salesperson tells you that the offer is for a limited time only, or that investment opportunities are limited, consider it a red flag. A legitimate investment will still be there tomorrow.
5. Never feel obligated. Don’t borrow to invest. Don't invest because the seller gives you something for free. Salespeople count on those freebies to guilt you into buying what they are selling.
6. Arm yourself with information. Learn to spot the red flags of investment fraud so you can protect yourself and your loved ones from personal losses.
Investor protection is an integral part of the Financial Industry Regulatory Authority’s (FINRA) mission. Unfortunately, far too many investors fall victim to Ponzi schemes, pump-and-dump scams and other types of investment fraud. The good news is that fraud and the growing threat of identity theft can often be avoided.
FINRA will help you spot the red flags of fraud and identity theft, and avoid the persuasion tactics of fraudsters. It’s also vital to know the right questions to ask about investments and the people who pitch them—and where to go to verify the answers. After all, it’s your money—learn how to protect it.
To learn more, visit the Financial Industry Regulatory Authority (FINRA) website at http://www.finra.org/investors/protect-your-money
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