Investing is a terrific way to increase your wealth portfolio and support businesses that you believe in. It’s very common for those with significant assets to invest a large portion of it and keep very little in savings on hand.
For this reason, it’s also important to be able to spot potential investment fraud before it happens. There are many different types of fraud, from market manipulation to pyramid schemes, from Ponzi schemes to advance fee fraud schemes. These are just a few examples from the Federal Bureau of Investigation, but any type of fraudulent information used to take money from a potential investor can be a problem.
Red flags to look for
Those committing fraud are going to be very careful to try to hide it, at least in most cases, but there are some red flags that you can watch out for. If you see these things, be very wary that it may be a fraudulent case. Examples include:
- Offering investments and claiming that there’s absolutely no risk.
- Providing returns that are overly consistent or guaranteeing specific returns.
- Offering investment opportunities in unregistered securities and areas where control systems are not in place.
- Using complex strategies designed to confuse the investor or hide the fraud.
One good rule of thumb is to always remember that something that sounds too good to be true probably is. If someone says that there is no risk or that you’re guaranteed a specific return, that’s just not how investing works and you need to know that something isn’t on the level. If you’ve been defrauded in any way, you also need to know about your legal options.