American Consumer Credit Explains How to Avoid Investment Fraud
There are several different types of investment fraud that consumers need to be aware of. These include pyramid schemes, promissory notes, high-return of risk-free investments, Ponzi schemes, affinity fraud, and internet investment fraud. To help consumers determine actual investment opportunities from scams, national nonprofit
"Rather than seek the advice of a financial expert, many Americans now invest their money on their own in a market that is complex and fast-paced," said
According to the AARP Investment Fraud Study, since 2014, the
ACCC explains how consumers can avoid investment fraud.
1. Research – It is important that consumers do a thorough research of the company's business – not just reviewing newsletters or their press releases – to understand their product or service before investing.
2. Unsolicited offers – Pay close attention to any unsolicited offers to invest in a company, especially if the consumer can't find any financial information on it. They should be especially careful of off-shore or foreign investments, as they are harder to trace if something goes wrong.
3. Always ask questions – Fraudsters don't expect consumers to ask questions or do research before they invest. It's important that consumers do their part and ask for references or where they can find more information before investing, especially if it's unsolicited. Ask about the investment strategy and be sure it is fully comprehensible.
4. Make confirmations – Confirm who the auditor and custodians are and that they have a good reputation. Mutual funds are more regulated than hedge funds, and historically have fewer instances of fraud. If they will not provide any of this information, it is best to avoid them.
5. Avoid sending money fast – Fraudsters will push consumers to send money fast with a "once-in-a-lifetime opportunity" type of plug. No investment is guaranteed. Consumers should always stay away from sending money via email and investments that are sent via email, especially when unsolicited.
6. Limit investment – Although this will not prevent fraud, being aware of how much money consumers are investing at once can limit the amount lost if something goes wrong. Even when safeguards are met, there is still a slight chance of fraud.
ACCC is a 501(c)3 organization that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:
- For credit counseling, call 800-769-3571
- For bankruptcy counseling, call 866-826-6924
- For housing counseling, call 866-826-7180
- Or visit us online at http://www.ConsumerCredit.com
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