Don’t fall for these investment scams
THE STACK #10Every new show these days seems to be about some con artist, from Inventing Anna to Bad Vegan, We Crashed, Drop Out and Tinder Swindler.
If you've watched any of these shows, you might be asking how these people fall for these scams; you could see it from a mile away! So how could these victims not see that? And keep giving the con artist money?
The thing is, most con artists spend a lot of time and resources to get their victims to TRUST them.
You could be the smartest person and still get scammed by someone if there is existing trust.
So don't be too quick to judge.
In today's STACK, I'll discuss some popular investment scams and how to avoid them.
THE STACK
Investment schemes
There are different kinds of schemes, from Ponzi schemes, sou-sou and whatever new name they come up with.
It usually involves someone asking you for money to "invest" and promising a certain % of guaranteed returns.
The problem is there is no tangible asset, and the scheme uses the money from new "investors" to pay off the old investors.
The cycle continues, and if all the investors ask for their money back at the same time, the scheme collapses, and everyone loses their money.
Stay away from get-rich-quick schemes.
Crypto-currency and Forex scams
While cryptocurrency and forex are legitimate investments, they are rife with scammers.
These scammers contact you to invest with them and promise high returns.
They ask you to send crypto to their crypto wallet so they can double it for you.
Their trading platforms look legitimate and paint a mirage of your "investments" performing well.
When it's time for you to withdraw your money, the story changes.
If you want to invest in cryptocurrency, ensure you're making trades yourself and on reputable platforms.
Pump and dump
Pump and dump is a strategy to hype or "pump" a stock of an underperforming company or coin.
These are usually called meme coins or meme stocks. The hype starts on social media channels.
The stock prices get inflated to a ridiculously high price due to lots of unsuspecting investors buying into the hype out of FOMO.
The instigators "dump" all their stocks by selling them, which makes the prices fall back, leaving most investors with a huge loss and holding on to worthless stocks they cannot sell.
This term is commonly referred to as "holding the bag."
If you're hearing about a "hot stock" or "hot coin" on social media, it's already too late to get in.
Always research and buy companies that show the potential to continue making profits over the next 10 yrs.
Foreign investment scam
The scammers try to convince you to invest in a company or industry that is about to explode in another country.
One of the selling points is that this will be tax-free to foreign investors.
You may receive some return, but ultimately, you lose your capital.
Stay away from any investments that are not verifiable or regulated.
Retirement Unlocking
This scheme usually promises instant access to locked-in retirement accounts, such as LIRA and RRSP, without penalties or taxes.
You're instructed to open a self-directed account and be given investments to choose from.
You can lose all or most of your investment and still get charged taxes.
Stop trying to cut corners with taxes, use tax-sheltered accounts like TFSA and RRSP and invest in assets that are tax efficient.
....and pay the taxes you owe!
THE TOOL
FRAUD PREVENTION WEBSITES
Is there an investment you're not sure of? You can go through this list of existing frauds to see if the investment is legitimate:
THE ACCOUNTABILITY
When was the last time you updated your passwords?
You should change the passwords for sensitive accounts like your personal banking and investments at least once a year to keep your accounts safe.
Also, set up multiple-factor authentication to add an extra layer of protection to your account.
Commit to changing your passwords by your birthday; that makes it easy to remember.
THE COURAGE
THE KNOWLEDGE
What is an investment scheme?
An investment scheme pools the money of investors to purchase an asset with the goal of distributing its profits to the investors.
There are both legitimate and fraudulent investment schemes.
What is an investment scam?
An investment scam is any "investment" that seeks out capital from investors without any intention of returning the profits or capital to the investors.
The goal is to make money for the scammer.
All investment scams are fraudulent.
In next week's STACK, I'll share tips on spotting a bad investment.
Have you fallen for any of these scams?
I would love to hear your story.
Keep stacking and stay vigilant!
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