Anyone who has lost money on an investment has probably asked this question: was this bad luck or was this investment fraud?
Forbes published an article on this very question, and we thought it was worth repeating. While anyone can be the victim of bad timing, a sudden turn of the market, or faulty analysis, when it comes to investment fraud, there are four warning signs that every investor should watch for.
Get Rich Quick
Who doesn’t want a quick and easy fix to their financial problems? If you are being offered the opportunity to make an enormous amount of money in a very short time, beware!
According to JPMorgan, investors should expect, on average, a 7% annual return over the next 10-15 years. Of course, some investments will rise above this mark and others will not. But in general, 7% is a very good benchmark when analyzing investment opportunities of similar risk.
Ponzi Scheme
Early investors in a Ponzi scheme often see amazing results on their investment. As they tell family and friends about their sensational find, more people (and money) are brought into the scheme – but the later investors “pay” the price of seeing little to no return.
This may be one of the most difficult scams to identify. After all, someone you know and likely trust is touting the investment, and they can verify a return on their investment. However, Ponzi schemes typically use phrases like low risk with high returns and secret investment strategy. Also, check to see if the investment and the seller are registered with the SEC.
Guaranteed High Return
The optimal word here is “guaranteed.” Who is making the guarantee? Is it in writing? Can your attorney look over the paperwork? The two words that may not belong in investing are “risk-free” because there is always going to be a risk.
As Forbes states, “… if there was an opportunity to earn an above market return on an investment … professional capital would have jumped on the idea long before it was presented to you.”
You Must Act Now
Investors should always be wary of the pressure for a quick commitment. Urgency is another way to keep you from doing research, investigating the seller, and asking questions. If you are dealing with a full-court press to act now or miss out on a “once in a lifetime” opportunity, we highly recommend you miss out.
The Harris Firm has extensive experience helping clients who have experienced investment fraud. We have recovered client’s funds in several different types of investment fraud. If you feel you have been defrauded in regard to an investment you have made, or are uncertain about an investment you are considering, please feel free to contact our firm.
