By Jane Morrow, IACCP®, Compliance Manager
It’s exhausting, isn’t it? Feeling like around every corner there is someone trying to separate you from your money. For example, I got the text below just the other day. Luckily, I was able to quickly spot that this wasn’t a legitimate investment opportunity…
As a compliance professional, I almost never use absolutes, but in this instance, I feel confident in telling you that if someone ever promises you 1,000% returns, you would be well served to run the other way.
We can’t always count on bad actors to make it so easy to spot their scams, though. Here, we’ve listed some common red flags you can keep an eye out for:
- The opportunity sounds too good to be true. Don’t get me wrong, I would love to invest $100 and get $100,000 back in a year. But that’s simply not realistic. The S&P has gained about 10% annually since its introduction in 1957. This 10% number can be used as a very rough benchmark for what reasonable returns might be. Of course, depending on the type of investment, time horizon, etc. the returns on an investment you’re considering may vary widely.
- You are promised “guaranteed” returns. No investment is completely risk free. No one can guarantee that an investment will perform in a certain way. The stock market can be fickle and anyone who claims to know what it will do with complete certainty is at best naively confident and at worst trying to scam you. The degree of risk you are taking in any particular investment is typically reflected in the rate of return you would expect to receive.
- There is an outsized sense of urgency. If you are being asked to send money right away, PAUSE. Scam artists want you to act now and think later so you don’t have time to see through their ruse, consult with others whom you trust, or otherwise decide not to hand your money over. Take your time and do your due diligence on any investment opportunity.
- The person promoting the opportunity is not registered. Did you know that it’s incredibly easy to find out if someone is a registered broker or investment adviser? The SEC provides lots of resources for investors, two of which are listed here:
- Research a broker at brokercheck.finra.org
- Research an investment adviser at adviserinfo.sec.gov
There, you can see the licenses that an individual holds and any disciplinary history they may have. You can also look up any investment firm on these sites. If the person/firm isn’t listed or doesn’t have an active license, you should definitely consider that a red flag for potential fraud.
Remember that you can always turn to your Wealth Manager here at MONTAG for assistance. We are just a phone call away and are more than happy to research any questions you may have.
As you go about your day to day, keep these tips in mind. I can’t guarantee it, but I suspect that at some point they will come in handy.
Sources:
The information provided is for illustration purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action to be taken. These analyses have been produced using data provided by third parties and/or public sources. While the information is believed to be reliable, its accuracy cannot be guaranteed. MONTAG employees do not provide legal or tax advice. For specific legal or tax matters, you should consult with your own legal and/or tax advisors. There are risks associated with investing in securities. Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss. Loss of principal is possible.
