Tips to Spot Investment Scams and Identify Potential Fraud

It can be hard to spot investment scams, even for the most seasoned investors. But there are steps you can take to become more aware of the different types of fraud you should avoid when considering investments. Whether you invest on or off the market, it’s important for you commit to making decisions only after you’ve performed proper (and sometimes exhaustive) due diligence. The more information and resources you can arm yourself with, the better equipped you are to seize opportunities and invest for success.

There are countless investments you can make with your personal funds and alsoA roll of twenty-dollar bills with a lock around the roll signifying protecting your investments by avoiding fraud. with a self-directed IRA. In either scenario, to succeed you must protect and preserve your wealth. Avoiding investment fraud and other scams is crucial when trading on the stock exchange and investing in alternative assets.

Use these tips to spot investment scams as a guideline to vet real estate deals, startups, business ventures, multifamily syndications, and more.

Due Diligence Helps Avoid Investment Scams

Research your investment and qualify the people behind it. Don’t be afraid to ask hard questions that deliver the answers you need to make an informed decision.

  • Use Google and outside sources for your research.
  • Find out if the investment meets legal and regulatory requirements.
  • Ask for references and talk to mutual acquaintances and investors.
  • Review documents that depict past performance, if applicable.
  • Compare investment firms or brokers to their competitors.
  • Weigh the benefits against the challenges of the asset.
  • Explore revenue, market, and margin trends.

If investing with your self-directed IRA

  • Make sure the asset is permissible in a self-directed IRA.
  • Remember that collectibles and life insurance are not approved assets.
  • Ask your custodian if they allow the investment.
  • Understand all assets are titled in the name of your IRA.

How to Identify Fraud

There are many different types of investment fraud. Spend some time reading up on how schemes work to identify red flags when reviewing an opportunity. There are a few other things you can do to further protect yourself from investment scams.

Putting certain practices in place has the potential to help you identify and avoid them.

  • Avoid telephone solicitation.
  • When possible, go look at tangible investment options like real estate.
  • Understand that “get rich quick” opportunities are a big, (huge) waving red flag.
  • Guaranteed returns are a red flag, too.
  • Never give personal information over the phone to someone you don’t personally know.
  • Send personal information, investment contracts, and other paperwork containing sensitive information through secure servers and/or software.
  • Don’t be rushed. Time may be of the essence in some matters, but if it feels like things are moving too quickly—trust your gut.
  • Pushy sales tactics such as “everyone’s investing in this” usually mean that everyone is not. (This might be the biggest red flag of all.)

Finally, keep up with fraud alerts by the U.S. Securities and Exchange Commission (SEC). Their resources are a gold mine in terms of education on investment scams and other nefarious activities you want to avoid.

Advanta IRA is a self-directed retirement plan administrator that serves clients across the nation. We oversee over $1.3 billion in assets under management and allow our clients to invest in all possible alternative assets. Contact us to learn more about how you can invest in alternatives to the stock market using a self-directed IRA.

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About Scott Maurer

Scott is an attorney and a graduate of the University of Florida Law School. Scott started his career with Advanta IRA in 2006. His experience with various investment types and their unique processes makes him an invaluable asset. Scott holds the designation of Certified IRA Services Professional (CISP) and leads engaging seminars and webinars that educate the public on the intricacies of self-directed IRAs.