Con artists have become increasingly sophisticated when attempting to scam investors. Social media, promotional videos, and emails have widened a con artist’s net. It can be challenging to determine whether an investment opportunity is legitimate or not.
Here are three common tricks used in investment scams. It’s important to recognize these red flags to help protect your hard-earned money.
1. A promise to get rich quick
Who doesn’t want to make a lot of money in a short amount of time?
This is a common tactic con artists will return to repeatedly. Often, these promises involve little effort on your part, short of giving up your finances.
Be skeptical if you’re asked to purchase certain products, are told your investment will double within a month or two or are promised wealth for performing menial tasks, such as clicking on a digital ad multiple times a day. Remember, if it’s too good to be true, it probably is.
2. Time is running out
Creating a sense of urgency is a high-pressure tactic used to get people to part with their money without vetting the source. Take note if you’re told an investment opportunity will be gone within a day or two.
You should also be wary of campaigns that limit investors to a certain number who must act before a specific deadline.
3. False testimonials
When you read testimonials or view videos from multiple people saying that they got rich from an investment, it’s hard to view this as anything but legitimate evidence. Of course, con artists may pay these people for their testimony, or they may be in on the scam themselves.
Some go the extra mile and create “independent” websites which purport to verify these claims. You should only trust established, reputable sources of information.
How to protect yourself
If someone is offering you an investment, perform an internet search to confirm that the person is licensed. Online tools can also let you know whether the person has any sort of disciplinary history with the Securities and Exchange Commission (SEC).