Perhaps the deal to grow your portfolio looks good, and you’re contemplating writing a check to your brokers before the opportunity closes. You need to weigh your options by considering the underlying investment factors like capital versus the expected returns. Having such principles when investing in any business is key to avoid scams and can safeguard your investments while growing your portfolio.
Investment frauds like Ponzi schemes and pyramid schemes have the same characteristics when approaching investors to make the next wrong move. They identify information gaps between you and the market and engineer ways to circulate money from one investor to another. However, the schemes grind to a halt when there’s not enough money supply to support the fraud.
Therefore, begin by questioning any opportunity your broker presents about the investment market. It’s empowering to spot red flags in your investment journey and enable you to make informed decisions while protecting your money.
Here are five ways to avoid investment fraud:
- Be Curious About The Investment Opportunity
Genuine investment opportunities have clear guidelines that you can follow and safeguard your capital. It gives detailed information about what to expect in returns, considering the market volatility. That way, you’re empowered and can determine whether or not to take the plunge and invest your money.
Conversely, fraudsters will present the potential of earning huge profits from a small investment. They’ll be inconsistent when sharing information and avoid answering questions you may have about the acquisition.
Therefore, you must further research opportunities and learn the underlying factors attached to the investment. Don’t fall victim to investment frauds by rushing to fill the limited spots. You could become another statistic of lost investment in schemes.
- Don’t Accept Bogus Offers
Cold calls and sales pitches are standard in the investment market, and they’re unsolicited. If you receive calls and messages offering great deals, think twice. You could be one step away from making wrong investment decisions.
Fraudsters advertise investment project seminars and send attractive incentives like paid trips or seating allowance to make them look legit. Once there, they’d brainwash you by presenting results of previous success stories that don’t exist. They’ll always prompt you to take action or miss out on increasing your portfolio. That’s enough red flags for impending investment frauds, so be cautious.
- Countercheck Credentials
A background check on the investment broker, products, and the company selling you a business idea is a great way to avoid falling for scams. They should have documents showing where the established is registered and the location. Also, legitimate companies have regulations that ensure the protection of investors.
Question the credentials to ensure you’re dealing with a reputable company in whatever investment opportunities they’re selling to you. You’ll have to establish whether they’re trustworthy and deliver returns as promised. Moreover, you can countercheck their credentials against the regulatory bodies which supervise businesses you’re looking to add to your portfolio.
What’s more, check the company management and evaluate their track record. You can collect information and reviews about the companies they’ve served and determine the best approach to the opportunity.
- Be Skeptic
There are no shortcuts to building rock-solid portfolios. It takes quite an amount of time and money to build portfolios through the compounding effect of your capital. You need to endure the investment process to enjoy remarkable returns.
Anyone selling dodgy ideas of making huge profits or giving unrealistic profit figures is a scammer. For instance, rogue stock traders would want to trade stock using your money and collect a percentage of your profits. If the market collapses, you’ll individually suffer the loss on investment. Be a skeptic of schemes and avoid gambling with your portfolio.
- Have Investment Principles
Expert investors have principles that guide them throughout their investment journey. Whenever anyone presents an investment idea, it’s their reference point before writing a check. For instance, they leave the meeting and block the concept if they don’t understand the business or investment model.
Likewise, you can copy such principles to avoid investment fraud. You can demand clear guidelines from anyone pitching incredible business deals and opportunities to shield yourself from investment traps. They should produce evidence of return on investment against the current market value, which informs you of your decisions. Don’t trust your guts; rely on facts when investing in any portfolio.
Conclusion
There are equal opportunities to make profits or lose your investment. It all depends on your knowledge of the investment landscape. Fraudsters are always looking for information gaps between the investment markets and your money. You need to expand your knowledge to avoid pitfalls presented by investment frauds.