How can you avoid becoming prey to investment fraud? You need to remain in charge of your investment decisions and to do so in an educated manner. Too many investors trust unscrupulous individuals and outright con artists to make financial decisions for them. Taking the following actions can help lessen the chances of falling prey to frauds and scams:
Perhaps, the best advice when making any investment is to ask questions not only about the investment, but also about the salesperson and company for which the person works.
Research before investing
Fraudsters expect you to do little if any investigation before investing. They want you to fall for their pitch and believe that they have already done all of the research for you. Before investing your hard-earned money, you should check out the background of anyone with whom you might be doing business. You also need to be wary of anyone who suggests putting your money into something you don’t understand
Know the salesperson or financial advisor
You should check out the person touting the investment before you invest, even if you know the person socially. For example, you should verify licenses and check out a person’s disciplinary history. You also should avoid judging an investment by how a person looks or sounds because these qualities have no bearing on the soundness of an investment opportunity. Swindlers want to appear polished and professional to create the impression that you can trust them.
Be watchful of unsolicited offers
You should regard unsolicited sales offers with the utmost caution and skepticism, especially when they promise unusually high rates of return, quick profits, and “once-in-a-lifetime” opportunities. Also, you should avoid being rushed and say no to anyone pressuring you to make an immediate decision.
Be constantly vigilant
You should avoid making an investment and then sitting by the sidelines for the results. Instead, you need to monitor your investments by keeping track of their progress. You should insist on regular written reports and be skeptical of excessive trading. If you have trouble retrieving your principal or cash out of profits, you need to find out why.
Know what to look for
If you understand little about the world of investments, you should take the time to educate yourself or talk to a qualified but uninvolved party about the investment. By making yourself knowledgeable about different types of fraud and signs of any impending problems, you can reduce the chances of being deceived.
Avoid making decisions when emotions are high
The worst time to make an important financial decision is when your emotions are elevated. Fraudsters and scammers are aware of this behavior and know how to use your emotions against you. To avoid falling for a hoax, you need to manage your emotions around financial decisions.