February 25, 2016

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Keep Your Money Safe by Avoiding These Popular Investment Scams

The stock market’s recent downturn had many investors fretting, but scammers were overjoyed. Whenever there’s uncertainty in the market, people tend to look for safe havens — and that’s when criminals go into high gear.

Using phone calls, emails, and letters, scammers drum up all types of questionable schemes that promise high returns and low risk. Before you part with a single cent, here are some of the most popular investment scams you need to be aware of:

  • Good old gold: When thinking about a surefire way to turn your money into a good investment, gold is often seen as a particularly bright option. But setting aside numerous arguments from economists about why these investments aren’t ideal, the biggest risk is that you could be paying for nothing (or at least less than your money’s worth). There are many gold scams, and they tend to get pushed more during market downturns. One classic is the “bait and switch” investment scam, in which a company lures you in by promising a certain type of gold product, but then switches things up by delivering another, less valuable item.
  • Bulletin boards: There are hundreds of online forums where people rant and rave about their investment options, and some of the larger ones have thousands of messages posted hourly. While you may find some valid insights, investment scammers also use these boards as a way to lure others into questionable schemes. They may claim to reveal insider information about new products or big contracts, or spread negative rumors about certain companies. According to Investopedia, it’s nearly impossible to sort out the valuable posts from the fake ones.
  • Crowdfunding: Started as a way to facilitate donations for creative professionals and nonprofits, crowdfunding has evolved into a tool for smaller businesses to get investment capital. You can easily invest through an online “funding portal” and select several projects at once. But the Office of the Indiana Secretary of State notes that investors must be extremely cautious about these investments. Some may be scams, while others may simply be run by people who aren’t allowed to seek investments. Either way, you could lose money on the deal.

Scam-Proof Yourself

It’s not always easy to spot scammers. After all, some may be charming or persuasive enough to make you think their claims could be legitimate. When considering investment opportunities, take steps like these to protect yourself:

  • Talk in-person with an investment advisor who can give you insight on the effects of rebalancing your portfolio or changing your long-term goals. Market volatility is part of investing in the stock market, so it’s important to consider your investment objectives and find an advisor you can trust.
  • Thoroughly research any company or individual offering an investment opportunity. Often, you can contact your state’s securities division to get more information or hear about recent scams. If you think you’ve been affected by a scam, you can file a complaint with the Securities and Exchange Commission.
  • Much like any kind of identity theft prevention, be very cautious when giving out personal or financial information, especially to people who have contacted you out of the blue.

Navigating the stock market’s volatility is rarely easy. Fortunately, by keeping up with the latest fraud efforts, you can help avoid investment scams and safeguard your money.

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