The Bernie Madoff scandal shook the markets and rocked the investing world, and his recent conviction for defrauding thousands of investors in a Ponzi scheme has been an eye-opening warning to many investors that scams come in all shapes and sizes.
And although Madoff's investing scam appears more sophisticated than most scams, it actually follows a pattern similar to other scammers out there.
Warning Sign #1:
Following an 'Elite' Model
Scammers tend to angle their pitches around the lure of the "market elite."
They will sell you on the idea that their strategies are the same used by the fat cats on Wall Street. However, the joke's on the scammer in this one. It actually does not take much effort to find out the strategies of market elites and how they manage their investments.
Don't make the mistake of getting cheated out of your money for information you could have acquired yourself.
Warning Sign #2:
Insider Information
Even savvy investors can be enticed by the promise of insider information. Scam artists know the lure of strategies not available to normal participants, especially in options trading and the forex market.
By promising to provide exclusive access to information you would otherwise miss out on, many schemes can hook you and take you for all you're worth. However, you can rest assured that these insider "tips" are anything but legit.
Warning Sign #3:
Promises of Steady Profits
When investing in a recession, you tend to get used to seeing low numbers on returns. So the thought of steady profits at a high rate can be so enticing that you might overlook the details and sign up without thinking. This tactic is found in just about every investment scam. Although the return amount varies, they all represent that those profits will be flowing constantly.
Even in good times, we all know steady profits can never be guaranteed. Don't get distracted by big dollar signs.
Warning Sign #4:
Limited-Time Offers
One of the oldest tricks in the scammer book is pressuring you with a limited-time offer. These ploys imply scarcity and scare you into the idea that you're missing out on such a great deal that you sign on the dotted line before you even realize what's happening.
While it's true that there are often small windows on certain investing opportunities, you should never allow yourself to be pressured into a deal based solely on the idea that it will never come around again.
In fact, there's one scam that has been pedaling the same limited-time offer to the first 100 buyers since 2004! Take time to read the fine print, and your chances of falling victim to a scam will diminish.
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