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10 Ways to Avoid Stock Market Scams

10 Ways to Avoid Stock Market Scams

There is no way of going over every single scam that exists. This article covers the most commonly seen elements of a scam, whether it is preying on the greedy, scaring people or tricking people. This article builds psychological walls that scammers will have a hard time breaking down.

1. Unsolicited Calls And Emails Are A Warning Sign

Most people know to avoid these sorts of things, but there are some very sophisticated attacks these days. The age of misspelled emails and callers asking to speak to the head of the house is over. There are companies that know vast amounts about you to the point where they are able to pose as almost anybody and get away with it. There are also emails that are able to mask their identity to appear as if they are from a legitimate company, or even from a friend.

2. If You Do Not Understand, Then Do Not Invest

Isn’t this common sense these days? Some scammers defraud you by withholding information, and some do it by confusing you with too much information. They give you details, evidence, reports, and technical information to reassure you, yet if you actually understood what was going on, you could see what information is biased, incorrect, or misleading. If you do not understand, then do not risk your money.

3. If There Is A Time Limit Then It Is A Scam

This is true of all scams. Time limits and pressure are big factors. It is not only pump-and-dump and short-and-abort schemes that require a lot of pressure. The fear of loss is as big of a motivator as greed, and scammers exploit that fear with time limits and other levers.

4. Question The Likelihood Of Any Return

Scammers are going to spend a lot of time convincing you of the likelihood of a return. A less sophisticated scammer will spend a lot of time trying to convince you of this, and they are very good at it. You need to be rather more objective and ask yourself just how likely your return is. If it is that likely, then why are they trying so hard to convince you?

Think of it this way, if you had a million dollar idea that was going to revolutionize the banana growing industry, would you try “that” hard to sell the idea? Or, would you make it more difficult for people to invest in your idea because you are holding out for the highest bidders? Would you be spending your time trying to convince struggling pensioners? Or, would you be approaching the Bill Gates and Donald Trumps of this world to look for investment?

5. Pump And Dump Schemes Are Still Common

They need a mention because they are not always illegal. There are many people that have the power to make a company appear more valuable than it is. Pump-and-dump schemes are often perpetrated by important and influential people that claim a company’s shares are amazing, only to sell their shares in the company a few days later. Should you ignore other people’s advice? No, you shouldn’t, but you should also ask what you would do in their shoes. Would you keep your 250,000 shares in a company if it had just jumped up from $1 to $10 per share?

6. Can You Verify And Check Out Your Broker?

If the broker has been in business for years, if he/she/they have a good online and offline reputation, then you may be able to trust him/her/them a little more. However, it is also a good idea to get a few references from other people; especially other people in positions of power or that are noted for their honesty and/or authority. The more money you wish to invest, then the more references you should get. Sure, your broker will only give you his/her/their most pleased clients, but even they are able to offer some insights into the type of person/people you are going to be dealing with.

7. Be Very Wary Of Seminars And Advice In General

While trying not to sound repetitive, you should be wary of any sort of advice. Keep in mind the rules of reciprocity. Scammers are aware that once they give things away for free that most people will feel they have to give something back, even if that thing is trust or cooperation.

Also, beware of group pressure where you feel obliged to do something because many people will like you if you do not. For example, if you are buying jewelry and several staff swarm around saying how great you look with a piece on, then it is more difficult to say no.

Another scam trick that may occur at seminars involves a bit of Neuro-linguistic programming. It involves asking a bunch of questions so that the host keeps getting the answer yes from the audience. When you are primed, the host starts telling you what he or she wants you to do and you agree.

A cheap and tacky example of this Neuro-linguistic programming trick is, “Do you want to be rich? Do you want respect? Are you willing to go the extra mile? Are you prepared to give it your all? Are you prepared to risk it all to win? Are you tired of being left behind? Are you geared up for the power of success? Are you ready to invest in Pammy’s Pyramid and make your fortune?

8. Stay Up To Date With The Most Recent Scams

This is such a “nothing” tip, but it has to be said. Checking the news every day to check for scams is silly, but at the very least you should try to avoid being purposefully ignorant of swindles. When you are doing your research for your newest investment, make a point of searching for related scams.

9. Advance Fees, Offshore Investing And Tax Free

Here are a three common fraud arenas. Advance fees are often a warning sign that something is wrong. Offshore investments are okay, but they require 5x more research and planning. Any Tax-free investment opportunity is also suspect. Many scammers use people’s greed to manipulate them and the promise of not paying tax is typical of a greedy person.

10. Diversify To Be On The Safe Side

Do not put all of your eggs in one basket. Even seemingly safe investments have a risk. The risk could be the investment itself, or the security surrounding the investment where an account may be drained because somebody cracked your password. Your money is more vulnerable than you may realize, so diversify to lower the risk of a complete loss. It means you may not be able to make as much of a return, but it adds another layer of safety.

About The Author

Ben Todd

Ben was a seriously broke graduate student with bad credit who after finding himself rejected for any sort of credit card or loan for most of his adult life, finally decided to get his financial life in order. 'He spent several years reading as many financial advice books and blogs as he could.And suprisingly, Ben found he actually LIKED the topic of personal finance; after fixing his own finances, starting his own successful work at home website business, and using his earnings to get out of debt, created echeck.org to help others do likewise!

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