Avoid Investment Scams

With the stock market in turmoil in recent months and numerous other investments losing their appeal, many people are looking for ways to earn back the funds they’ve lost on stocks or to get some positive returns on the money they have left. Unfortunately, there are many con artists out there trying to take advantage of people eager to offset their market losses. The New Jersey Society of Certified Public Accountants (NJSCPA) offers tips on how to avoid being scammed:

Is It Too Good to Be True?
This is always the first question to ask when spending your money. If an investment or business opportunity promises guaranteed, rapid or unusually high returns, examine the investment materials carefully to determine how these assurances can be possible. Remember, high yield securities also carry high risks, including the possibility that you could lose your entire investment.

Just because a company has a nice office, attractive brochures and an appealing website, that does not mean it is poised for success – or that it’s even a legitimate business. The more questions you ask, the more likely you are to discern if the promises are real or if they are masking the risks involved. Here are some of the best questions to ask:

Is This Company Registered?
When a company registers its securities with a government regulator, it is required to publish an annual report and a prospectus that details its financial situation. It is possible to sell securities without registering, but this should be another red flag to potential investors. It may mean the company is trying to avoid regulation – and the kind of disclosure that regulation requires – because it has something to hide. Ask for an investment prospectus and annual report, and review them with an objective adviser. If these documents aren’t available, it’s probably best to walk away from the investment.

Does the Investment Have a Track Record?
Some scammers will offer you the chance to get in on the ground floor of a new opportunity. This may sound tempting, but it’s best to invest in a business that has a proven history of financial success. Ask, too, if the people involved in the investment have any experience in this field. What is their previous success in this business? What documentation is available to demonstrate their track record?

Why Do I Have to Invest Immediately?
Con artists often insist that you must send in your money right away because only a few shares of a company are left. This should be a red flag to turn down the opportunity. The cons are only trying to prevent you from asking questions they can’t answer.

Is All My Money Being Used to Buy Securities?
High-pressure salespeople often operate the way they do because they are expecting to get big commissions from the sales they make. Those commissions are deducted from your money. Before you invest, find out if there are fees or costs involved, and ask how much of your total outlay will actually be used to make an investment. Of course, legitimate stock brokers do charge transaction fees, but it’s always important to ask what they are in advance so you know what amount will be invested.

Turn to Your CPA
Your local CPA can offer you independent, objective advice on all your important financial decisions. Consult him or her with any money questions that you or your family are facing. If you don’t have a CPA, you can easily locate one online using the NJSCPA’s free, online Find-A-CPA service. Just go to www.findacpa.org, and in a few clicks you can locate a highly qualified professional who can assist you.

For more information on various personal financial matters, visit the NJSCPA’s public service website at www.MoneyMattersNJ.com. While visiting, you can subscribe to Your Money Matters, the NJSCPA’s free, monthly email newsletter to receive valuable personal financial planning advice throughout the year.

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