Sometimes, it can be difficult to determine whether an “opportunity” is an investment or scam. Part of the difficulty comes in the fact that, so often, a scam is presented as an investment. Rarely does a scammer hold up a sign emblazoned with the words, “This is a scam!” In fact, a good scammer is likely to hook someone close to you and then get him or her to convince you that you are getting in on something good.
Before you commit your money to any “investment opportunity,” make sure that you are really dealing with an investment—watch out for signs that you might be a mark for a scam.
What Makes a Good Investment?
It’s important to understand that all investment carries with it the chance of loss. You could lose your money even in a solid investment. And that is one of the first indications that you could be dealing with an actual investment. Scrupulous brokers and advisers will tell you that there is the chance that you could lose money. Other indications of a good investment include:
Truly, you are better off starting with the simpler investments, and trading through an online discount broker. Keep it simple, and straightforward, and you will be less likely to find yourself victimized by a scammer.
Signs that it Could be a Scam
Even while you consider the merits of this “opportunity,” watch for red flags indicating that you could be dealing with a scam. First and foremost, consider whether or not the deal seems too good to be true. This is a dead giveaway for an investment scam. No legitimate investment comes without risk, and you aren’t very likely to make money hand over fist in a short amount of time.
However, some scammers are more careful about how they present themselves. So you might have to be even more on your guard. Be wary of the following tactics:
It’s nice to feel like an insider, and tempting to think that you are about to make tons of money with very little work. However, you need to take a step back, and realize that what you could be looking at is a scam. It’s not glamorous to take a dollar cost averaging approach and invest at a basic level, but you’ll be less likely to lose your money to an investment scam.
Miranda is a freelance contributor to several investing and personal finance web sites. She also writes for her own blog, Planting Money Seeds.