10 Questions You Should Ask Yourself to Identify Investing Scams

Investing ScamIn today’s unpredictable economic situation and condition, identifying which investment programs that are legitimate, let alone performing well, is quite a trivial task.

I found a valuable resource from The Motley Fool that I thought I’m going to share with you because it is too valuable not to :)

The article listed and explained 10 questions which answers could help you to identify investing scams and avoid them at all cost. I’ll explore the 10 questions with my own case to share.

10 questions that reveal investing scammers

  1. Does it promise “low risk and high gain?”

    The reality check: If such investment programs existed, all money in the world would went in to the programs. The old common sense is always right: high risk, high gain. Period.

  2. Will it be “too late” if you don’t act now?

    I fell to this premise quite often in the past. The “too late” pitch really blur your logic eyes – and it works. Why? Because in each of us, there always be something that wish once-in-a-lifetime opportunities to happen in our life, somehow. Although such opportunities do exist, they are very rare. The truth is, there always be another opportunities in the future, regardless – so acting now is not a smart move to take, and it involves more emotional than logic.

  3. Does it claim to predict the future?

    “It will double in three months.” Right-o. Nobody can be sure about anything, and anything too sure in investing is highly questionable.

  4. What is the background of the salesperson and his/her employer?

    Do they have the right certification? If so, the more important question is, are they successful investors themselves?

  5. Does it “guarantee” anything?

    Just like in #3, nobody can guarantee anything. It’s illegal, by the way.

  6. Has the salesperson offered to reimburse you for any losses you might incur?

    Not only this is illegal, this is ridiculous. It’s like “If you find our product cheaper in other retail stores, we pay you double the difference in price” promise in large retail stores.

  7. Are you one of the “lucky few who have been chosen” to invest in XYZ company?

    It happens a lot to me, especially in credit cards and mutual funds offers. This is investment, not a lottery!

  8. Does the salesperson claim to have personally invested in the company, too

    It looks like a strong proposition, but what if he/she failed? Will he/she contact you to bail out from the investment. Not in your lifetime!

  9. Is the salesperson unwilling to supply a prospectus or financial statements

    Here’s what the Motley Fool recommends: If the company is new, you must be given a prospectus. If not, you should ask for financial statements for the last two years.

  10. Is the salesperson’s information “a hot inside tip?”

    Hot, insider, tip is “hot” for a reason – it’s either illegal so that it can jail you or it’s simply a fictive tip to attract customers caught off-guard.

There’s there – Hopefully those tips will help you invest your money in the right company at the right time.

One last thing to ponder – equip yourself with adequate financial knowledge before investing your money. What you know not only will protect you from scammers, but also from any financial problems in the future.

Happy investing!

Ivan Widjaya
Outsmart scammers.

Image by Keith Bacongco.