Earlier this week, we asked you to take a pop quiz to see if you were at risk of investment fraud.
Then we debunked a few myths by discussing why we are all at risk of investment fraud.
Today we focus on empowering investors by giving you the tools to build your own smart investor toolkit. The tools we’ll discuss today deal with evaluating potential investments.
Fraudsters are tricky, and there is no foolproof way to ensure that you will never be victimized. But there are several tools that investors can use to help determine whether an investment is a legitimate or not.
Investor Tool 1: Questions
Questions are an investor’s greatest tool when deciding whether to enter into an investment. When meeting with an investment professional, ask questions. Bring a pre-prepared outline of questions with you to an in-person meeting. Have your questions in front of you as you talk about a proposed investment over the telephone. The Securities and Exchange Commission’s Office of Investor Education and Advocacy has developed an excellent guide that lists all the questions you should ask to fully evaluate an investment.
Investor Tool 2: Scam Meter
If you have already been presented with an investment and are deciding whether to invest, use FINRA’s excellent Scam Meter tool. Scam Meter is a quick and easy interactive tool that asks users questions about an investment based upon the common red flags of fraud. After answering the questions, Scam Meter analyses whether the investment in question and how it was presented raise any red flags. The Scam Meter analysis also provides tips for further evaluating the investment in light of the results.
Investor Tool 3: Education
But, why wait until you are presented with an investment to use your tools? The best tool for fighting investment fraud is education — learn about smart investing before you invest.
There are excellent web-based resources that can help you sharpen those tools. Learn more on How to Spot the Red Flags of Fraud here. For additional fraud fighting tips, visit FINRA here and the Investor Protection Trust here. You may also want to consider these Smart Tips for Investors. Learn all about investing from investor.gov and saveandinvest.org.
The North American Securities Administrators Association (NASAA) also maintains a fraud center for investors interested in learning how to prevent investment fraud. For an entertaining way to ensure you won’t become a fraud victim, check out NASAA’s Fraud Ninja video series.