Investment scams may try to make you feel like you’re about to miss the next big opportunity. Scams cover many markets such as cryptocurrency, foreign exchange, real estate or precious metals like gold. Sometimes, the scams are presented as informative seminars or training promising to offer you insider secrets or “proven” tricks to earn significant returns. But don’t fall for them. More often than not, they’re out to make you the victim. Here are some tips to help you avoid investment scams.

1. Educate Yourself

   Start by understanding common scams. Common types include Ponzi schemes, where returns are paid to earlier investors using the capital from newer investors, and cryptocurrency scams, where fraudsters take advantage of victims’ excitement over new crypto opportunities with the promise of huge profits.

2. Beware of High Returns with Low Risk

   There are no sure things in life. Legitimate investments carry some measure of risk, and there are strict regulations on disclosing that fact. If an offer promises guaranteed high returns with little risk, be skeptical.

3. Watch for Pressure Tactics

   Be wary of investment opportunities that seem urgent and require immediate action. Scammers may try to pressure victims to act quickly to prevent them from having time to think things through, consult with others or spot red flags.

4. Understand the Investment

   Avoid investing in something you don’t understand. Complex strategies that are difficult to explain could be a red flag. Don’t jump into technologies like cryptocurrency mining, Non-Fungible Tokens (NFTs) or artificial intelligence (AI) unless you understand the technology, how it is developed, what creates its value and what their market is.

5. Always Require Documentation

   Legitimate investments require clear, detailed paperwork. A lack of written documentation should give you cause for concern.

6. Beware of Unsolicited Offers

   You should also be wary of unsolicited investment opportunities, especially if they come via email or social media. You should view cold calls or emails that come out of nowhere with a skeptical eye.

7. Do Your Homework

   Before investing with anyone, you should perform background checks on the company and individuals involved. Use resources like the Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to help you verify information and histories of people and organizations. FINRA has a tool called BrokerCheck. The tool helps you make informed choices about brokers and brokerage firms and provides easy access to investment adviser information. BrokerCheck tells you instantly whether a person or firm is registered, as required by law, to sell securities or give financial advice.

Investing is a great way to grow your wealth, but it’s important to stay cautious. Staying informed and educating yourself can help you avoid falling victim to investment scams. Remember this rule above all else: if something seems too good to be true, it probably is.

For more resources on scams and fraud, be sure to visit the Cadence Bank Fraud and Security Center.

Sources:

https://consumer.ftc.gov/articles/investment-scams

https://www.cnbc.com/2024/01/18/5-financial-scams-to-watch-out-for-in-2024.html

https://www.cnbc.com/video/2024/01/19/fraud-is-at-a-crisis-level-says-expert-five-financial-scams-to-watch-out-for-in-2024.html

https://www.consumerfinance.gov/ask-cfpb/what-are-some-common-types-of-scams-en-2092/

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.