We’ve heard a lot about investment schemes and scams. While you may be sure you couldn’t fall victim, you should not be so sure. You need to take steps to assure where you invest your hard earned cash is legitimate.
The key to avoiding such schemes is verifying you investment. For example, for real estate check the tax records for the properties you are investing into. Verify the closing documents, the escrow arrangements, and the title of the assets you are buying. For mutual funds, check and ensure the stocks included are really owned.
Look beyond the surface on the financial facts. If the investor takes these steps their vulnerability goes down. Best of all the steps to test the veracity of these items is really not very difficult. In most cases, the intimidation factor of having to check is worse than the actual event.
If you are the principal, some similar items also apply. Ensure you know who your investors are. Find out what their reputations are. Insist on valid tax ID. Check references and financials. Check soft references. Be certain no strange requests will impact the cash such as making wires to foreign lands or checks to cash that aren’t clearly defined.
Receiving returns is no guarantee that your investment is above board and valid. Keep in mind that the scam may not be to take your cash. Instead, the scam may be on another company or individual from who the investment cash is being taken and an attempt being made to launder it on the way to the thief.
In general common sense is a great place to go to ensure that the investment you are making is legitimate. Verify company contact information. Check the backgrounds on principals. Take a look at the credit history of the company and of the principals. Verify the reality of the project, products, or services your are investing. Look for news reports, check out sales contracts, check with lenders, verify bank account holdings, ask for disclosure on financial information and additional personal information.
There will always be a new scheme, but for the average investor if the return is too good to be true well then it is true good to be true. You may be taking to great of risks or you may be involved in somthing that isn’t real. After all if smells like a fish, if it looks like a fish, then the probability is that it is a fish.