Staying Safe from Investment Scams: A Financial Safety Checklist

Scammers never tire of thinking up new ways to separate people from their money. Florida residents are often targeted because the state has a large number of retirees, as well as a generally affluent population. Of course, people of all ages and backgrounds need to be cautious of scams. To help keep you safe, keep the following tips in mind.

Don’t Trust Anyone Who Contacts You Randomly

If someone contacts you about an investment “opportunity” out of the blue, whether by phone, email, or direct message, it’s most likely a scam. Legitimate financial advisors don’t cold-call or send mass messages. Scammers may also impersonate government officials or legitimate companies.

Safeguard Your Privacy

Scammers in Florida may search for potential victims on social media sites, public forums, and even comments on blogs and YouTube. It’s best not to talk about investing or financial topics on public platforms. Never post personal or confidential information online unless you’re on a secure site.

Verify Suspicious Messages From Friends or Family Members

Scammers will sometimes impersonate people you know and trust. They may hack into someone’s social media account and send you a message. Be wary if someone you know suddenly starts trying to pressure you into an investment scheme or to loan them money. If you have any doubts, contact the person directly to confirm it’s them.

Watch Out For Ponzi Schemes

A Ponzi or pyramid scheme is funded by getting a steady supply of new investors. The investment itself doesn’t generate any real profits, so at some point, the system collapses, and you lose everything you put into it. Signs of a Ponzi scheme are unusually high returns paid out consistently. The seller may claim to have a secret system for generating profits in stocks, cryptocurrency, or other types of assets. The best way to avoid these schemes is to deal only with trusted financial companies.

Invest With an Established Firm

There are thousands of investing sites and apps around today. Many people like the convenience of being able to invest in any kind of asset without going through an intermediary. However, when you use many different platforms, you increase your risk. The more apps you have, the more likely it is that one will get hacked. Additionally, financial companies and websites shut down for various reasons.

While fraud, hacking, and other mishaps can occur anywhere, they are more likely to happen with smaller and newer services. When you conduct most of your transactions with established financial companies, you can still get the convenience of investing or trading online 24/7. Still, you avoid the risks of using dozens of smaller sites and questionable apps.

Beware of Pump and Dump Schemes

Investors vary regarding their risk tolerance. Some assets, including penny stocks and lower-end cryptocurrencies, such as meme coins, are inherently speculative. Some are “pump and dump” schemes where the creators entice people to invest only so they can cash out, leaving investors with a total loss. These kinds of schemes are often hyped up in videos and social media groups.

The best way to stay safe from pump-and-dump schemes and other investment frauds like this one in Clearwater, FL is to ensure that most of your portfolio is invested in more stable assets. Most financial advisors recommend allocating no more than 5-10% of your total investment portfolio to speculative assets.

Research Before You Invest

It’s now easier to invest than ever. There are also more types of investments available to the average person, including stocks, futures, cryptocurrencies, and Foreign Exchange (Forex) trading, which involves global currency transactions. There’s also a lot of hype about many assets, especially on social media.

Keep in mind that most bloggers, vloggers, and influencers recommending investments aren’t doing so out of altruism. They are usually motivated by self-interest. Aside from touting their investments, they are often affiliates for trading platforms. This means if you sign up with them, they make money, whether you win or lose. Always do your research. For U.S.-based companies, a helpful resource is the EDGAR database, which the U.S. Securities and Exchange Commission maintains.

Common Warning Signs to Look For

Here are some red flags often associated with investment fraud schemes.

• You’re told the investment will bring huge returns in a short amount of time.
• You are supposedly getting an insider tip that’s not publicly known. Since sharing insider financial information is illegal, it’s not likely that you’re going to get it from a stranger.

• The investment is promoted with high-pressure tactics, such as claiming that you need to invest immediately or risk losing a once-in-a-lifetime opportunity.
• The seller claims to have an infallible system, often using the latest technology such as AI. Even the most advanced charts, systems, or AI bots can’t predict future prices perfectly. If someone did have this kind of ability, they would most likely use it themselves and not share it.
• You are offered free information. Scammers often lure victims in with a free event, which could be a live seminar or webinar. Of course, not everyone who presents such events is dishonest. A significant clue is whether they employ high-pressure tactics to prompt you to invest immediately.

Learn to Avoid Financial Scams

To reduce the risk of being scammed as a Florida resident, it is essential to stay vigilant. Don’t let yourself get pressured into an investment, especially one that sounds too good to be true. Take the time to research potential opportunities. Keep in mind that there is no shortage of investments out there, so there’s no reason to rush into anything before you’ve done due diligence.