Signs of an Investment Scam (Part 2)

Signs of an Investment Scam (Part 2)

Every investor is hoping to find that perfect investment at some point — the one that will produce massive returns and make you rich beyond your wildest dreams. Unfortunately, there are less-than-scrupulous people out there who will play into those fantasies by pitching you scams.

There is a big difference between making a bad investment, which happens to nearly all investors and investing in a fraudulent deal, which shouldn’t happen to any investor. Just as you should learn to recognize a sound investment, you should become familiar with suspicious deals guaranteed to take your money but give disappointment in return. Here are the signs you should look out to know if the investment is a total scam.

  • It was pitched at a free investment seminar

You’re invited to have a free lunch at a free investment seminar along with several dozen other eager investors. Then, along with your food, you’ll be served up a high-powered sales pitch disguised as “investment advice.” Unfortunately, investment seminars are a favored platform of scammers looking for a venue to pitch shady investments.

If you must attend an investment seminar, don’t even think about buying into any investments on the spot. Go home and do plenty of research first, including asking one or more reputable financial advisors what they think of the investment.

See Also: Some Warning Signs of a Bad Investment

  • It’s priced at less than $5 per share

There is often little information available for “micro-cap” stocks and the companies that issue them, so it’s easy for scammers to make up anything they want about them. These tiny companies are not required to file financial reports with the SEC, which leaves investors with little background information to confirm a seller’s claims about the stock.

And micro-cap stocks are typically among the most volatile of all stock investments, making them extremely risky. In certain cases, a micro-cap stock may be a good investment choice for you, but you’ll need to do some serious research on the company before you decide.

See Also: How to Spot a Successful Company for Stock Picking?

  • It’s recommended by an unlicensed advisor

Qualified investment advisors go through a long and severe process to get certified by one or more agencies. However, there is no legal requirement for someone claiming to be a financial advisor to get any sort of certification or license at all. That means that if the financial advisor you’re talking to is not certified, he or she could literally have no investment knowledge or experience. Find someone who has proven to have some qualifications. If they’re not certified, walk away.

  • It has sketchy business practices

Sales representatives who promote investment scams and business owners who fraudulently seek investor dollars are likely to engage in sketchy practices and unusual operations. They may avoid legal requirements or present misleading documents.

Such questionable activity may not directly impact the underlying investment opportunity. But the lack of concern for proprietary actions and straightforward communications indicates that money is a priority, not integrity.

In case you haven’t read the first part, here is the link.

See Also: Warning Signs of a Risky Investment

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