Provided by RBC Wealth Management and Thomas J. Powers

Being optimistic about increasing your assets and financial wealth is normal. However, being overly optimistic can have its downfalls and make you vulnerable to becoming a victim of an investment scam. There are a number of scams plaguing investors that offer low-risk, high-return investments. It’s an impossible combination, and it costs Americans dearly each year.

Most famously, Bernie Madoff was able to attract clients to invest in a Ponzi scheme for decades that defrauded his clients of billions of dollars and left many formerly well-to-do families in financial ruin.

Today, one of the more efficient and cheapest vehicles for scammers to reach a broad audience has been over the Internet. Anyone, of course, can build a website, write an online investment newsletter, or post a message in a chat room and make their messages seem real and credible.

By following a few important guidelines you can help minimize your chances of becoming a victim of an investment scam.

  • Beware of unlicensed individuals selling securities. To verify whether a person is licensed to sell securities, call your state securities regulator. If they’re not registered, don’t invest.
  • Be wary of investments that offer high returns with minimal risk. Know the risk before you invest. Typically, investments that offer the greatest return are also the most risky.
  • Understand your investments. Don’t take anything for granted and do your homework. A good place to start is with a licensed financial advisor or your state securities regulator. Other sources include the Securities and Exchange Commission and the North American Securities Administrators Association.
  • Be cautious when following investment advice via the Internet. Individuals use the Internet to “pump and dump” stocks that they tout in chat rooms and mass emails. Some states have Internet surveillance programs that watch for fraud or investigate investor complaints.
  • Don’t agree to anything immediately. Individuals may try to pressure you into making an impulse decision because the opportunity won’t be around long. Pressure to act immediately is almost always a red flag for fraud.

If an investment seems too good to be true, it probably is. Do your own due diligence and protect yourself from being caught in an investment scam. It will benefit you and others who could fall prey.

This article is provided by Thomas J. Powers, a Financial Advisor at RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance.

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC