Protect yourself from
EVERY YEAR Americans lose billions of dollars to
investment scams. Because of the volatility of the
stock market, many investors are looking for safe
places to stick their money. Others are looking for
ways to increase their portfolios quickly. On top of
that, pay cuts, job losses and other challenges of a
recession can make everyone more susceptible to
schemes that take advantage of financial insecurity.
Here are some examples of common investment fraud:
Advance-fee fraud. A scammer will play on
an investor’s hope that he or she will be able to
reverse a previous investment mistake involving the
purchase of a low-priced stock. The scam generally
begins with an offer to pay you an enticingly high
price for worthless stock in your portfolio. To take
the deal, you must send a fee in advance to pay for
the service. But if you do so, you will never see that
money, or any of the money from the deal, again.
Affinity fraud. Taking advantage of the tendency of people to trust others with whom they share
similarities, scammers use their victim’s religious or
ethnic identity to gain their trust and then steal their
life savings. The techniques range from “gifting”
programs at churches to foreign exchange scams.
Internet fraud. All kinds of scams, from simple identity theft to a letter from Nigeria informing
you of unclaimed funds to investment opportunities
offered via email are perpetrated over the Internet.
Ponzi schemes. The formula is simple: Promise
high returns to investors and use their money to pay
previous investors. This is investment fraud in its
Prime bank schemes. Con artists promise
investors triple-digit returns through access to the
investment portfolios of the world’s elite banks. In
an effort to warn investors, the Federal Reserve
pointed out that these don’t exist.
Promissory notes. These short-term debt
instruments are often sold by independent insurance
agents and issued by little-known or nonexistent
companies. They typically promise high returns,
upward of 15 percent monthly, with little or no risk.
Senior investment fraud. Everything from
Ponzi schemes, unregistered securities and promissory notes to charitable gift annuities are employed
to con seniors out of their money.
Variable annuities. A variable annuity is a
contract between you and an insurance company,
under which the insurer agrees to make periodic
payments to you. Annuities are often pitched to
seniors through investment seminars, but regulators
I purchased a Mini Cooper
from the Mini Cooper
website. After I drove it
for 50,000 miles with no
problems at all, the engine
fan began to make a
whirring sound. However,
this happened just a few
miles after my 50,000-mile
warranty expired. I went
to the dealer, and after they
checked the car they told
me that since my warranty
had expired it would cost
$7,000 to ;x. What can I do?
Manhattan Beach, CA
© 2011 FIGH T BACK! INC. ALL RIGH TS RESERVED.
AMY CAN TRELL
David Horowitz is a leading consumer advocate. Visit his blog at
www.fightback.com. He is a frequent guest on radio and television
stations. Consult your local listings for dates and times.
The ;rst thing to do is get he estimate double-checked by your local mechanic. Next, write out a detailed letter describing everything that has happened and everything that needs to be ;xed in order to make the car run again. Then, contact a representative from the corporate of;ces of Mini Cooper and explain your situation. Have the representative work with the dealer to ;x your problems in a less expensive way. When you take your matter to the corporate division, a representa- tive can often make an arrangement that your local dealer cannot. C
say these products are unsuitable for many retirees.
Variable annuities make sense only for consumers
who can afford to have their investment locked up
for 10 years or longer.
Here are some important tips on how to protect
yourself when you make your next investment:
Don’t be driven by emotion. Con artists
work to control the conversation, talking fast, using
exciting statements, promising big returns and acting like your friend. Scammers listen closely to your
present economic situation and take advantage of
your vulnerabilities. Beware of false promises and
schemes that are too good to be true.
Don’t be afraid to ask questions. Many
times when you are investing, the terms may be
complicated, and once the seller goes into
all the fine details it is easy to be overwhelmed and confused. Ask questions,
and don’t be ashamed to ask for clarification. Also ask important questions of
yourself: What do you expect to get from
this investment? What risks are you
willing to take?
Get a second opinion.
Get somebody who is not associated with the deal and has
nothing to gain from it to
evaluate the investment. Talk
to someone who has made a
similar deal or worked with
the same seller.
prey on people’s vulnerabilities. They target people who
aren’t motivated by greed, but
by a desire for financial stability. Those who are looking to
secure their retirement, leave
something for their children or
help put their children through
college are often the most vulnerable. Arm yourself with
the knowledge of these scams,
and prepare yourself before
making an investment in the
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