Investment frauds are now dime a dozen. The good news is that if you are smart enough, you can guard yourself against investing into such financial frauds and safeguard your personal finances. If you wish to learn more about the investor profiles of those who are most likely to be taken advantage of, and the tips for protecting yourself against such frauds, read on!
One of the main reasons for frauds is the do-it-yourself approach taken by investors when choosing their investment vehicle. Many investors decide to choose their own investments for the 401(k), self-funded retirement vehicle, or individual retirement accounts. This leaves the doors wide open for exploitation by fraudsters.
Profile of investors who are at risk: According to AARP survey, the victims of fraud has these three distinct characteristics.
#1 Demographic: Majority of the victims were well educated, financially literate, older married males. Many had an above-average income and even included military veterans.
#2 Mindset: Most of the victims tended to measure their success from the amount of wealth accumulated. They were open to trying out risky investments and actually preferred unregulated investments.
#3 Behavior: The victims of the fraud typically responded to emails from brokers with suspicious sales pitches and attended investment-related phone calls. They also made at least five investment decisions on an average in a year.
How to protect yourself from scams? In order to safeguard yourself from such financial frauds, the following tips are highly useful.
- Register your number on the do-not-call list. This will help to decrease the number of unsolicited calls.
- Always use registered advisors for investments
- Have a call-blocking system for screening the scam calls.
- Do not give out your personal information or information related to your finances until you ensure that your investment advisor is registered and can be trusted.
- Never invest when you are under stress in your personal life. Be it a job loss or death in the family, do not invest until you are in the right frame of mind.
- Do not invest based on the advertisement you see on TV or phone calls or emails. Make sure that you thoroughly vet the financial advisor and get all your questions answered before you sign the forms.
Never be overly confident that you are too smart to be fooled by fraudsters. Remember that majority of victims were educated, smart, and were older as well. Do not trust your money with anyone until you are 100% satisfied with your screening process of your financial advisors.
How you handle your personal finances is a private and confidential matter. Investing your hard earned money should be done with utmost caution, as swindlers are getting smarter and more creative day by day. By following the six tips, you can safeguard yourself against fraud to a large extend. More importantly, use your common sense before you agree to any investment. After all, if it seems too good to be true, it usually is!