Even small investments can put you at risk for investment fraud, and it’s important to approach it with the same caution you would use with a larger investment. If a deal sounds too good to be true, it probably is – even if the amount of money you’re working with is small.
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Unfortunately, fraudsters prey on inexperienced and vulnerable investors. If you are just getting started planning your financial future, it’s important to know what to watch out for. As an investment fraud lawyer, I cannot stress enough how important it is to know what to listen for during a pitch. Here are a few common red flags:
- You feel pressured to buy now. No reputable broker or investment adviser should ever pressure you to act right away or get pushy with their sales tactics. If you feel pressured, it may be time to move on and work with someone more professional.
- The returns are much higher than the returns on similar investments. It’s rare to see an investment provide much higher returns than usual if there isn’t a catch. If the returns seem suspiciously high, it’s time to knuckle down and do some serious research into the product.
- The returns are “guaranteed.” All investments come with a certain amount of risk. If your broker swears that the investment is a “sure thing” or “guaranteed,” there’s a good chance he or she is pulling your leg.
- You can’t seem to get it in writing. If you’re having trouble getting the documents you need related to the investment, it’s a big sign that something isn’t right.
- You don’t understand the product. If the investment or your broker’s investment strategy doesn’t seem to make sense, ask questions. If your broker can’t answer or can’t seem to explain it in language you understand, you may want to steer clear.
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