What Red Flags Should I Look For When Investing?

Investments are almost always a profitable part of saving. Everyone wants more money, and one of the easiest ways to get it is through passive income. But this means that scammers might attempt to swindle your potential gain into their own.

A High-Yield Investment Program, also known as HYIPs and High-Yield Investment Fraud, is a type of fraud where victims believe they are investing in a deal sure to grow their money at a high rate. Common examples of these types of scams are Ponzi Schemes, Pyramid Schemes, and Advance Fee Fraud. Each of these types of scams involve investing your money into a “get-rich-quick” scheme guaranteeing high yields, but in reality just end up in the pockets of con artists.

As the old saying goes, if a deal is too good to be true, then it probably is. Deals promising huge profits, limited-time decisions, and “absolutely no risk” are sure-fire red flags that you’re dealing with someone in search of a mark. Use common sense when going about your business dealings so you don’t fall victim to these tactics.

These are the signs of a scam investment:

1. “Guaranteed” Returns

Here is a definite sign that your investment opportunity is fake: 

If you are presented with some form of urgent request promising quick rewards, such as, “Act now! This is a limited-time offer designed to double or triple your money with no risk whatsoever!”, that should trigger alarm bells inside your mind.

These types of guarantees are a tactic scammers use to bait people into buying in. It’s two-faced, using positive and negative reinforcement to stress the idea that you, the investor, need to act fast.

The positive is the promise of a large return-on-investment, but the negative is that it’s time-sensitive. Scammers try to instill FOMO, the fear of missing out, in their victims.

In reality, no investment is a 100% guarantee. Many factors determine an investment’s growth or decline. A bear stock market, national or global economic stagnation, and inflation are all elements that can factor into a legitimate investment’s success.

2. Either Complicated or No Details

Another sign that you could be getting into something less than legitimate is if your business or investment opportunity can’t be clearly outlined. In general, it is vital to know the details of your investment. You need to be informed of all business details before putting any of your money down.

Also, a sign that you could be defrauded is a sudden lack of communication once you’ve turned over your money. By then, however, it could be too late. Before you hand over any cash, make sure you get contact information, make copies of your receipts, and do your research on all you can about the business and the salesperson.

The best way to handle this kind of situation is by talking to someone you trust.

Whether its friends or family, or a service representative from your financial institution, if you feel that someone could be scamming you, it’s best to not stay quiet. Getting an objective opinion on your situation can help you gain a clearer perspective.

If you’re a victim of a scam, it can be difficult to nearly impossible to regain your lost money. Overall, prevention is the best defense. However, should something like this happen to you, there are steps you can take to bring the perpetrators to justice. Investment crimes like those listed in this article should be reported to the Securities Division of the Florida Office of Financial Regulation.

If you decide to contact your financial institution, they can help you as they likely have experience dealing with other similar cases of fraud and know what you can do to prevent further damage. Florida Credit Union members can reach our Contact Center by calling 1-800-284-1144.