Keep your wits about you when investing
Investors beware. If you think you’re not a target for scams, you’re wrong.
Bernard Madoff might have set his sights on high net worth investors, but most scams aim lower. And if you have the idea that you could make money by investing, then you’re in the crosshairs.
The Securities and Exchange Commission is warning potential investors to be particularly careful about signing up for e-mail newsletters that recommend stock and other investments.
Why? Because not all of them are on the up-and-up. Some have been paid to tout specific investments. Others are just up to no good. And even the legitimate ones reflect someone’s views — it’s just a matter of whether those views should be respected and trusted. Look for clear disclosures in the newsletters about conflicts of interest and be wary of those who hide that information, the SEC says.
The federal government’s Investor.gov website has a lot of good information for new investors and a primer on avoiding scams.
Here are some of things to be wary of, according to the SEC:
■ An offer that sounds to good to be true.
■ A promise of guaranteed returns with an implication of no risk.
■ Claims that can’t be verified. (Don’t take someone’s word for their credentials. Check them out.)
■ Be careful of sales pitches built around the idea that if you don’t invest, you’d be missing out on an opportunity that so many others have already taken.
■ Pressure to invest immediately. You need time to do homework. Don’t allow someone to scare you into giving up your money because the opportunity will expire in a few hours.
■ Be careful at free seminars and lunch presentations. Wait and thoroughly examine the products being offered. The SEC says pay particular attention to the fees related to investments and whether the products are appropriate for your situation.
The best scam avoidance tactic is common sense. Because con artists are skilled at getting victims to suspend their common sense, it is important to resist impulse investment decisions. Stick with what you understand. If you don’t understand something, but are interested, learn about it — independent of what the seller has to offer.