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Investment Frauds – How Do You Avoid Them?


The rising number of scams is a cause of concern for investors, traders, and government officials. What can you do to tackle such issues and avoid them to safeguard your investment?

This article takes a deep dive into the various checks that you can have for protecting your investment. However, it is crucial to note that this is not an exhaustive list of dos and don’ts.

The Basics 

Ask Questions

It often happens that most people blindly invest in a particular plan without any investigation. Fraudsters are aware of this fact and make full use of it. You can find them by doing your own research before investing.

You can seek more information by asking questions to the person who offers the investment plan. Even if you are gathering information from the adviser, you should carry out your own research independently. 

Research Is Key

Message Board postings, unsolicited mails, and company news bulletins can never be the only source of information to finalize your investment decision. You should take steps to deep dive into the company’s products or services and understand their revenue model.

You can check the company’s financial data on the SEC’s EDGAR filing system. You can even refer to EDGAR to ascertain any new investment plan.  

The Salesperson

When you plan to invest, you should spend more time finding out about the salesperson who pitches you the product. You may know the person socially, but you need to check his professional track record.

You can start by checking the licenses that the person possesses to sell any securities in your state. A crucial aspect to also check is whether they or the firms they represent have any past history with any other investor or regulators.

The FINRA’s and SEC’s online databases can be useful to check out the disciplinary history of advisors and brokers for free. You can reach out to your state regulator for additional information too.

Unsolicited Offers.

You should be careful when you receive an unsolicited pitch for investment. It often happens that you may see a form of investment getting highlighted online while there is no financial information available from independent sources.

Such offers are mostly part of ‘pump and dump’ schemes and can be catastrophic. We often get recommendations for offshore or foreign investments. If such investments go sideways, it is hard to locate the money that you send abroad.

Online Protection 

Social marketing sites and the entire online space offer a plethora of options for fraudsters. You can choose to protect your social media accounts by checking the various security features.

You should be aware of the various frauds that can happen and know the red flag that signals them. 

The Red Flags

Do you wonder how financially sound people fall prey to investment frauds? Researches suggest that the fraudsters use a host of persuasion tactics that are custom designed as per the victim’s psychological profile. 

Too Good to Be True

When the investments sound too good to be true, you should check the numbers properly. You can check the current returns with the promised yields on popular stock indices. You can potentially lose your money when you opt for an opportunity that claims you can receive a substantially higher return.

Such claims are extremely risky and have higher chances of fraud.

Guaranteed Returns 

Any investment that you make carries a certain degree of risk with it. When you opt for a low-risk investment portfolio, the chances are the returns will also be lower. Therefore the risk is an inherent element of any investment.

High risks are always a part and parcel of high return investment. At times it also happens that the entire folio investment can take a big hit. Fraudsters commonly convince investors that high-risk trades ensure a guaranteed high return. You may receive calls that state ‘you should not miss such an opportunity.’

Fraudsters often plant an image in your head where you get rich easily. Please be cautious of such claims. You should avoid falling prey to these traps by fraudulent practitioners.

The Halo Effect

It often happens that people tend to get misguided by a con artist’s ‘halo’ effect. You should check the qualifications of the person approaching you before taking any call relating to the investments. 

Where Can I Seek Help?

If you have ever faced fraud or have concerns about your stock market investment, you can reach out to various agencies for help. Stock market scam recovery with PayBack LTD or other agencies is convenient because they dedicate resources to make a case for you by collecting evidence against the fraudsters.

Such entities with a proven track record follow the case and help you to get back your money.

There are also agencies like the Financial Industry Regulatory Authority (FINRA), U.S. Securities and Exchange Commission, and North American Securities Administrators Association (NASAA) who can be of great help in this regard.

While you should keep in mind the above, another aspect that you should be aware of is investing in a dream that follows the pattern of other’s investments. The chances of getting misguided are high when you start believing that you can earn too when someone you know made a fortune from a deal.

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