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What scams continue to trouble investors?

| Jan 20, 2021 | FINRA |

People usually invest their money to either grow or preserve their capital. No matter what investment vehicle someone chooses to employ, the investor does not want to end up scammed. Unfortunately, cases exist of investors in Pennsylvania falling victim to scams. People worried about falling victim to investment scams should familiarize themselves with these cons and review suggested ways to avoid them.

Common dubious investment schemes

A number of investment scams have been around for a long time. The classic Ponzi scheme received its name in the 1920s and continues to serve as the basis for scams to this day. Ponzi schemes often involve using new investors to pay investors already on board. So, someone could invest $100,000 and receive 12% annual “dividend payments,” but the dividends come from others putting money into the “investment.” A Ponzi scheme could run a long time but may falter when a lack of new investors makes paying the original ones difficult.

There are scores of other “classic” investment scams that could cause financial harm. These include pump-and-dump scams, pyramid ventures and advance-fee scams. Why do these scams continue to separate people from their money decade after decade? For one reason, they often work. Scammers may rely on these schemes because they reliably generate revenue for them. Another reason is that would-be investors don’t recognize the scam.

Falling for an investment scam

Not everyone is familiar with a particular “age-old” investment scam. A person might not recognize the red flags and warning signs of a scam due to a lack of familiarity. And then some might refuse to believe the offer is too good to be true.

Promises of massive returns on investments and substantial dividend payments or tremendous passive income streams might prove so appealing that investors jump on an offer. However, dismissing good judgment may lead to suffering financing losses, possibly devastating ones.

Investment scams come in many forms and could leave victims in financial ruin. Reviewing FINRA research might provide insights into common scams. Investors who discover they are victims of a scam could contact a lawyer for legal assistance.

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