Three investment scams that you should avoid at all costs

Julie Brownlee, Fsp Invest, 09 Apr. 2014

Tags: investment scams, scams, investment scam, investing, pyramid scheme, boiler room, investing, investment scams to avoid

Unfortunately, there are fraudsters who work under the guise of legit financial professionals in a bid to scam you out of your money. You may think it’s something that won’t happen to you. But you’d be surprised how convincing these fraudsters can be, conning the most seasoned of investors. If you know what to look out for, you’re less at risk of becoming a victim. So here are some investment scams that you should immediately be wary of…

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Investment scam #1: The pyramid scheme

Pyramid schemes work by you paying a significant fee to join an ‘investment’ scheme with the promise of high returns at a later stage. In fact, there is no investment in this type of scam, the team of experts at The South African Investor explain. The returns come from the fees generated from new members.

A pyramid scheme comes to an end when the supply of new members stops. Those last into the scheme lose their money. The only people in the scheme that reap the rewards are those who promoted it in the first place.

Investment scam #2: ‘Boiler room’ scams

Boiler room scams are all about trying to sell you worthless shares. The salesmen might hype these up as the ‘next big thing’ and insist you have to invest now to make the most profits.

If anyone calls you trying to get you to invest in shares, especially from overseas, be wary. Chances are it’s a scam.

You can read more about boiler room scams here.

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Investment scam #3: Very high income products

Very high income products can be extremely risky. This is especially so when interest rates are low, like they are at the moment.

For the promise of high returns, you’ll most likely have to take on huge amounts of risk. And that means you have a high chance of losing any money you put in.

So there you have it, three investment scams that you should avoid at all costs.

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