One of the most prominent places people are being scammed – investments. According to the Senate Special Committee of Aging, investment scams are becoming more widespread than ever, scamming older Americans out of nearly 3 billion each year.
The purpose of an investment is to watch your money grow, not be stolen. If you would like to protect your investments, keep reading this guide to learn the five most common investment scams and how you can avoid them.
1. Ponzi Scheme
The infamous Ponzi scheme is named after Charles Ponzi, who was known for his con artist ways. Ponzi schemes involve a hierarchical system where current investors are paid with the funds from new investors.
These types of schemes typically don’t generate actual earnings. The money must be constantly flowing in from new investors to support the operation.
How to Avoid
When it comes to Ponzi schemes, the red flags are all over the place – promises of large returns with little to no risk, secret strategies, and difficulty finding where they generate earnings from. With any investment, it’s critical to do your due diligence and make sure you understand the investment.
With cryptocurrency being somewhat misunderstood by many, it makes scammers jobs easier to take advantage of individuals.
Cryptocurrency scams can come from anywhere – emails, pop-ups, even social media. These con artists will often give you a proposal to send them bitcoin and receive double the amount.
To avoid cryptocurrency scams, make sure you are investing through a legitimate broker. Also, it’s important to be skeptical when you are offered something for free, especially when it comes to investing.
3. Real Estate
Real estate scams have been garnering a lot of attention lately, especially when it comes to timeshares. Unfortunately, timeshare scams are flooding the market. Many times investors will purchase timeshares without doing any homework and end up getting scammed. They will then require the services of a timeshare exit company.
How to Avoid
Investing in a timeshare is tough, you must do your research and understand fully what you are investing in. If you are already part of timeshare and would like to get out, consider hiring a cancelation attorney to avoid any headaches.
4. Stock Market Scams
The stock market is an excellent place to grow wealth – however, there are several stock market scams to look out for.
Pump and dump schemes are common with lower-valued equities because of the scammers’ ability to influence the price. Investment frauds will typically try to influence the investor to purchase certain securities, knowing they will lose money.
To avoid falling victim to investment fraud, it’s recommended to do your due diligence before making any purchasing decision. Be very careful when other investors try to influence your purchasing assets – stick to what you know.
5. Binary Options Scams
Binary options are derivatives of stocks, meaning the price is based on and influenced by an underlying asset. These options can be used to speculate and protect investments against price decreases.
These binary options scammers will tell you how quickly you can make money trading options when, in reality, they are just looking to take your money.
How to Avoid
Avoiding binary options scams starts with recognizing what they look like. Scammers will promise absurd returns with only a little bit of capital upfront. Again, make sure you are researching everything about a company before investing.
Overcoming Investment Scams to Build Wealth
The best way to grow your wealth is by actively investing and generating consistent returns over time. However, the illusion of getting rich quickly leads many new investors into traps like investment scams. To avoid these, it cannot be stressed enough to do your due diligence and gather a complete understanding of the investment.