Summary: This article has been sent to us by ForexFraud.com , a site that specialises in helping investors and traders to invest and trade without falling victim to scammers and fraudsters.
Crooks, scam artists and liars have been around since the beginning. Some will outright lie while others will conceal their deception by making it very near the truth. It doesn’t matter whether you are dealing with a car purchase, a home purchase, or an investment, the person committing fraud is only interested in one thing—and it isn’t the suitability of the investment for you. They want to take your money and as much as they can get. They want to make you believe they have the solution to all your financial problems with their particular “investment.”
It is important for you to realize that anyone is a potential target and anyone can be deceived. The key to protecting yourself is to identify signs of deception before they show up on your doorstep. Knowing something about the markets in which you’re considering investing can be critical in helping you spot fraud. For example, if someone was considering forex trading, starting up a forex demo account would give them enough knowledge over time to spot fraudulent “opportunities”.
The first sign is one we’ve all heard, but as long as people keep falling for fraudulent investments it needs to be repeated as the first and foremost warning sign: if it sounds too good to be true, it probably is! The difference between a ten percent rate of return on ten thousand dollars and a fifty percent rate of return on the same ten thousand dollars is four thousand dollars. A promise like that simply isn’t real. But a person can still do well with a ten percent rate of return! Remember, it’s better to end up with eleven thousand dollars as opposed to nothing because you fell for a scheme like Bernard Madoff's.
Another prevention tool is state licensing. Every state has securities licensing requirements. This means that any investment representative or broker needs to be licensed in your state. This also gives you the power to verify that they are licensed. Most crooks will not be licensed!
Keep in mind that just because someone is licensed in the line of work does not mean they know what they are doing! Their training and experience is what counts. Ask for references and then consider who the references are. Do you know them? Do you know people that know them? Are they reputable? For every crook, there will be quite a number of legitimate investment representatives out there.
This is an area where it is key to utilize your current advisers. Run the investment proposal and the representative’s information by your attorney, your accountant, or even your doctor for that matter. Do they know them? Have they heard of the investment or the broker?
Another piece of the puzzle that could be helpful is the presence of a prospectus. This certainly does not prove authenticity by itself, but combined with the previously mentioned items, it can help you to discern the legitimacy of an offer.
Finally, a big indicator of trouble going into an investment is when you are controlled by greed or fear as the main motivator in your decision. If the primary reason for an investment is that you fear not having enough money when you retire, you are falling into this trap. This only increases the chance that you can be deceived. Likewise, if the main driving factor in pursuing the investment is to “get rich quick,” then greed is the overriding reason, which will also leave you vulnerable. Be wise, be realistic, and do your homework. You won’t regret it.
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