An investment can be a way to create income. But before investing, there are important aspects to consider that can help protect your money.
Scams are on the rise. You may get an unsolicited message on social media to invest in a company that claims it comes with no risk. Claims of guaranteed riches. Fraudsters may even hype false information online to promote the value of company stock to pump up the price. Then sell their own shares at the inflated price, while you lose money.
So, how can you protect your money?
Do Your Research
An important step to take is to determine the credibility of the one who wants you to invest as well as the investment opportunity.
- FINRA, a non-governmental regulator, provides a resource for researching brokers. You can go to: BrokerCheck.
- You can use the Investor Advisor Public Disclosure to research investment advisors.
- The North American Securities Administrator Association provides state-level information.
Additionally, the U.S. Securities and Exchange Commission (SEC) provides a toll-free investor assistance line: 1-800-732-0330.
You can also go to SEC Action Lookup – Individuals to research actions taken by the SEC. And to check whether an investment is registered you can use their Electronic Data Gathering, Analysis, and Retrieval – EDGAR database.
Take Your Time
You don’t want to be pressured to make a decision quickly. Thoroughly read the prospectus and disclosure statement. Understand what you are getting into before making a decision. This is your money. So, take time to understand everything about the investment.
- Claims of high returns with little or no risk is a red flag.
- Pushy dialogue and fear tactics are red flags.
- Missing information and misspellings in communication, are also red flags.
Be cautious when you are approached with an opportunity you did not initiate or were not looking for.
If it sounds too good to be true, it likely is.
