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Investment Scams and How to Avoid Them

Aug 17, 2007
Most people, especially those new to the investment arena, do not realize there are a number of common scams which are used to victimize investors each year.

The misconception about investing scams is that most smart investors believe they will "know one when they see one" - this is simply not true. Especially in the modern marketplace were criminals have all the resources of the world wide web to create realistic investing schemes which capture the investors attention as well as their money.

The anonymity of the world wide web is a breeding ground for scam artists targeting individuals who so desperately want to get rich quick. Many of these criminals will set up web pages with news letters, forums, and prospectus for companies which do not even exist.

These sites are design with information including success stories from other investors. This is used to lure new investors in. By following un-research claims an investor can easily lose his investments, retirement, and education funds.

Remember professional investors live by the mantra that customers buy products but investors buy securities. Do not be lured in but what merely sounds good. The key is to keep a keen ear for what sounds and is valuable. Major red flags include the use of emotional and subjective words in combination with an investing recommendation.

If you become interested in a stock there are several ways to check if it is a valid stock tip or not. The first place to start is research the company that the stock is for. Take a look at their financial statements to get an idea of how well the company is doing by checking both income and debts. If both of those are in order call the company and speak with human resources. Ask them to validate th claims in the newsletter, email or web page are true. These are great ways to check if a stock tip is fact or fiction.

Another great place to look for information about a specific company is the SEC. Public companies must register with and file yearly reports to the SEC to document their growth and development.

These reports are thoroughly checked to make sure they are truthful and accurate. This helps not only to confirm if you have a valid investment but will also document if the company's profits are going to continue to increase or decrease.

Access to the SEC and public companies can easily be found on the world web wide. If the advertisements claim to have certain investors feel free to call those companies and confirm their investments and their satisfaction with the company.

Many scam artists will use high profile company names to make the document more alluring to potential investing victims.

Additionally the NASD can be contacted. This organization helps states' regulate securities and has all the information needed to verify if a company is real or not.

Only through being an aggressive and educated investor can you utilize your money to it's fullest potential. Take the time to do the research, ask the questions, and if something feels funny, go with your gut.

There are plenty of real investing opportunities out there if you take the time to look.
About the Author
More Articles & Tutorials and a Free Investing For The Beginner E-Course at http://www.Global-Investment-Institute.com
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