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Is This An Investment Scam? – Wisdom Wednesday #32

Before you go throwing your money into the next investment scheme, take some time to consider if it is a scam or not.

Countless investors have been fooled by scam artists like Bernie Murdoff. Watch an episode of American Greed to see tragedies like this. Of the many hard working individuals who have lost their life savings. All because they put their trust where they shouldn’t have.

Don’t become a victim. I don’t want you to ever deal with trying to rebuild your life.

investment scam

So what are some warning signs of an investment scam?

There is a common theme with all investments scams. That is, if you see a promise for guaranteed returns– RUN THE OTHER WAY.

Investment Scams Promise Guaranteed Returns

No investment out there can promise you guaranteed returns other than FDIC insured bank accounts and CDs. The reason these accounts are guaranteed is because the federal government insures them. The bank runs during the Great Depression brought about this idea of FDIC insurance.

However, the returns on these accounts are tiny. Especially with the low interest rates of today, investing in these FDIC accounts is barely better than sticking your money under the mattress.

What about bonds? Believe it or not, even bonds aren’t guaranteed. Corporate bonds get paid assuming the company doesn’t fail. So there’s always that risk of failure.

You can’t ever call bonds or stocks guaranteed.

Even real estate investing is the same way. Your renter can default, lose their job, start squatting. The housing market can crash again like it did in 2007. Contrary to once held popular belief, housing prices don’t go up forever.

Investing is never guaranteed. You can take steps to avoid risk, and you can choose strategies that are more profitable than others.

But the Guy Seemed So Genuine…

You can’t blindly trust another person with your finances, especially if they are promising you guaranteed returns. Trust me, these guys aren’t to be taken lightly. They are often the most charming, smartest and nicest guys in the room.

There’s countless stories on American Greed about how the scammer is able to fake everything. He may provide balance sheet numbers (falsified), hold fancy investing conferences (with stolen money), and operate in exquisite offices (soon to be your bill).

Most of the time you can’t see an investment scam from its appearance. They may appear to have everything together.  But as soon as you see promises for guaranteed returns, red flags should be going off in every investor’s head.

Another big warning sign that an investment scam is in place is that you aren’t able to take out your money at any time. Unfortunately, by this time the ponzi scheme is probably unraveling and it’s too late.

So I stress that you carefully study before you invest. Look past appearances.

The biggest casinos in Vegas may seem to have it all together, but one look at their financial statements show that they are up to their eyeballs in debt.

You’ve worked so hard to earn that money. Evestors, do these simple things, and you’ll never be the victim.

-Spend some time carefully examining investments.
-Stiff arm those knuckleheads promising guaranteed returns.
-Constantly strive to learn more and be better.
-Never put all your eggs in one basket.

Predators prey on the weak.

**All Rights Reserved. Investing for Beginners 2013**
**Is This An Investment Scam? – Wisdom Wednesday #32**
**Photo shown above can be found here: Photo Attribution**