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How to Detect and Avoid Investment Scams

How to Detect and Avoid Investment Scams

As of this writing, we’ve featured two scams in the blog, one is the famous Birkin Scam involving a former flight attendant turned art gallery director allegedly duping members of high society in a top brand bag reselling scheme. Another one is about a certain archaelogist who emailed random people seeking for a Filipina nanny. The second one actually I would think in my opinion to be a scam, but no proof yet as there are no online information agreeing with my suspicion.


In the University Federal Credit Union website, listed are quick tips how to detect and avoid investment scams. You work hard for your money, hence you need to make use of it wisely. Smarter I must say. As scammers everyday find creative ways to hook us into their money-making schemes. Thanks to Remar Sutton for the article.

Let’s now take a look at the guidelines:

Caution flags that usually indicate shady offers

  • The promotion/promoter promises you a high return or a better return on your money than any other investment you have. 
  • They guarantee big profits in a short time
  • They say the opportunity has “no risk” or “low risk”
  • They pressure you to act right now because the opportunity won’t last or the “market is moving” or some other excuse. 
  • They often play on your fears. They particularly target seniors by playing on such worries as not having enough income for catastrophic emergency medical costs or outliving retirement savings.

If you happen to recall our earlier post on the Birkin Scam, seems like the five caution flags have been met:

Tips for protecting yourself from investment scams 

  • Ignore cold calls or unsolicited email or snail mail pitches. In my opinion that’s the safest option. Of course, many reputable brokers and investment businesses use cold calls, but I think “just saying no” to cold calls is safest. Remember that sounding friendly, trustworthy, plausible, and concerned about your welfare is the con artist’s chief weapon. If you are interested in investing or improving your investments, do your homework using sound independent sources, then you initiate the call. 
  • Never act quickly. Take time to do independent research. This holds true for any investment opportunity whether it’s presented by a stranger or a friend, or by an institution you know or a business unknown to you. 
  • Independently check out every offer you are considering. In Texas and most other states all persons offering investment securities must be registered with the state. Don’t accept the information in literature or on websites at face value; use independent sources to check out the offerings. Ask for complete information in writing about the risks, obligations and costs of the investment product; then check it out thoroughly. Where applicable, be sure to look at the information that companies are required to file with regulatory agencies as posted on those agencies’ websites. Even if the offer comes from a trusted friend, check it out. 
  • Keep control of your funds in your hands. Never just turn your investment account over to a broker or account manager no matter how upstanding. 
  • Check your account statements or written reports regularly. Look for errors. Ask questions when you have them. Be sure that there are no unauthorized or excessive trades or activities on your account. Say no to any “opportunity” that doesn’t have a regular, written way of reporting what’s happening with your money. 
  • Report abuse or fraud promptly to your state regulatory agency. If you suspect someone is “churning” your account, for example, or if you have asked to pull your profit or principal out of the investment and the representative or company stalls you, these may signify abuse. Report these and other problems quickly. 
  • If you’ve already been an investment fraud victim, beware of “reload” scams. Once you’ve been burned by one scam, the bad guys usually know who you are. If you’ve been a victim, expect to receive offers to “help” you retrieve those lost funds. Whether they call you or you see such an offer online, ignore it: the scammers just want to steal more of your money in a bogus attempt to “retrieve” what you lost earlier. This shameful ploy is called a “reload” scam-they’ve taken aim at you again.

Please bookmark this page and remember these guidelines before investing.It will save you your hard-earned money and even millions if you do.

“Too many people spend money they haven’t earned to buy things they don’t want, to impress people they don’t like.” Will Smith

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