The sad truth of the matter is in today’s economy scams are becoming more numerous by the day, and investment scams are one of the fastest growing types of scams. Why do stocks lend themselves to scammers trying to take advantage of people? It’s quite simple really, stocks are held by investors who are  looking to make money and those scammers are feeding on the need for the consumer to make money. Where there are investors looking to make huge returns there are scammers that are promising those unrealistic returns.

Three Major Signs of an Investment Scam

1. Unrealistic promises- This is definitely the easiest way to look for a stock scam. Scammers often sell their investment services as bring a “guaranteed” return of a huge amount, or tout an average return which is clearly not attainable. Don’t fall for these ridiculous figures, rather be realistic and understand that this is a very bad sign.
2. No clear strategy- Always make sure you have a clear understand of what kind of strategy is going to be used to try to help your investment portfolio. Investment scammers are good at glossing over the facts and the details of exactly how they will make your investment grow. If you don’t understand how they will make you money, you shouldn’t be investing with them.
3. No risk involved- Any real investment manager understands that there is always risk involved in putting your money into investments such as stocks, mutual funds, and other similar assets. There is no such thing as an investment in stocks that comes without risks. As soon as you hear “no risk involved,” head for the exits.

Investment scams can be difficult to pick up on because these schemes can be very well thought out. When investing your money remember that investing is a very serious task that requires plenty of homework and thorough research. There is no “simple” method of growing your money through investing.

It really is incredibly sad, but the truth of the matter is scams will likely be much more common during these rough economic times. As more and more people lose their jobs and are looking for some way to make money, scam artists see a perfect opportunity to sucker a lot of people into a really bad deal.

These scam artists that always like to prey on the elderly and those who are less likely to question their knowledge are now moving into a broader group of people and looking to prey on those who are having financial difficulty. In fact, last October the LA Times wrote about the recession being boom time for scammers. The Times article also points out several areas you should particularly watch out for scams. The scam artists promote some kind of scheme that says you will make some outrageous sum of money if you simply follow their advice, which we all know is just a code for “I’m going to take your money and run.” As the aforementioned article notes, please don’t fall for the home based business scams or the free lunch scams. The true fact of the matter is if someone is offering you a free lunch and guaranteeing you a huge amount of money they are likely either lying or exaggerating, and there is a fine line there.

The most important thing you need to do to avoid scams is be extra cautious and ask a lot of questions. A scammer doesn’t want you to ask them difficult questions because then you might get too much information and realize that it is a scam. Be slow to commit your money to any kind of investment or even any kind of charity until you have asked all the questions and done all the research to make sure it is legitimate. There is no free lunch out there, and don’t let anyone allow you to think there is!