How To Spot an Investment Scam
You’re online, and there’s a contest open to all. You know the answer, and the free gift is enticing. Should you enter?
You go into a shopping mall and are asked to fill out a form to enter a sweepstakes to win a car. You’d love to have the car, and, hey, someone’s going to win it. There’s no purchase necessary, so why not? “Don’t do it!” says Eric Stein, a scam artist who was interviewed (while in jail!) by The Wall Street Journal. He should know. In his interview, Stein provides the following information that will prove useful in avoiding the investment scams you so often read about.
- Don’t respond to email or snail mail that you didn’t request, no matter how legitimate it looks. Scam artists have become very professional and will produce something slick, glossy and easy to understand. Don’t fall for it.
- The online contests and car sweepstakes you see in stores are both used by scammers to target names and addresses. Don’t fill them out.
- Avoid funds that are advertised as “low risk, high return” or “safe,” or promise an outrageous return such as 25% per quarter. If it sounds too good to be true, it probably is.
- Don’t purchase financial products because a friend or clergy person recommends them. They may have already fallen for the scam without knowing it.
- Don’t talk to a financial salesperson on the phone if you don’t know him. Don’t be polite – simply hang up. Anyone can call himself a “financial adviser” or a “business consultant.”
- Buy stocks only from a licensed, registered broker.
- Don’t buy unregistered securities. Keep your eyes open.
- Don’t let the fact that traditional investments aren’t giving you the returns you want turn you into bait for scammers.