Since the economy has taken a tumble, I've noticed  that there is a new wave of fraud that investors need to avoid.  Whether it's work from home gimmicks, or get rich quick schemes, there are a lot of scammers out there that are desperate for your money.  I have listed below some things to consider before you get involved in an investment.

 

Some of the tactics used by fraudsters:

 

1.  All of the excitement focuses on your future luxury life.  All the focus will be on the money you make rather than the investment itself.

 

2.  Limited to only a very special group of investors.  No legitimate company places limits on who can invest in it, they would be deliberately limiting their own growth.  It's just a gimmick that you are in on a very special deal.  Your "limit" will often give you  a special opportunity to include your family and friends.

 

3.  Your investment opportunity is offered for a very short period of time.  The trick is to make you rush before you have a chance to think it through.

 

4.  Requesting money from you up front for vague fees.  The investment may be nothing more than collecting up front fees from you and then running.

 

5.  Pressure you with "hard close" tactics.  Any salesperson, both good and bad, will try to close a deal, but in this case it's overly aggressive.  A salesman telling you "I guess your in" and grabbing your hand from you and shaking it to "seal the deal" before you have a chance to respond would be an example.  (I actually had someone try this hand shake tactic with me).   Also getting back to you in very short periods of time, like meeting with you late at night, and telling you that they'll call back the next morning to see if your interested.

 

6.  Attempts to confuse, be vague, and avoiding answering questions.  Any indications of lying or deceitfulness is a reason to not invest.

 

Questions to ask to avoid scams

 

1.  Look into their balance sheet.  This is your business if your an investor.  If they keep putting you off or tell you "no", then walk away.

 

2.  Follow the money trail.  See how your investment is to help the company, and how the customer is suppose to interact, and how the customer benefits.  See how in the end you will get your payback for your investment.

 

3.  What are ALL of the costs involved.  Make sure that there are no hidden fees that can devalue your investment.

 

4.  Check out all of the liabilities involved in the investment, and how they can be limited.  Some investments will only take the money you've invested, while other investment may expose you to lawsuits and expose everything you own. 

 

Steps For Detecting Investment Fraud Don't Count On Social Security To Be Enough For Retirement Spending Dollars To Save Pennies Your Financial Mission Statement Predatory Marketing How To Choose A Contractor To Hire A Fast And Dirty Lesson In Beginner Investing Avoid Being Scammed When Buying A Used Cell Phone Save Money With A Amish Electric Fireplace? Find a Mentor For Your Career When it Makes Sense to Pay Off a Zero Percent Loan Paying off Debt vs. Investing Marginal vs. Effective Tax Rate 2008 Tax Planning - Refundable vs. Non Refundable Tax Credits How to Settle Credit Card Debt Myself Your FICO Score Now Counts Authorized Users Wills do not Avoid Probate Court, Where Living Trusts Avoid Probate Completely Taking Out Debt Right Before Bankruptcy 3 Harmless Activities that Will Lower Your Credit Score Obama's Economic Stimulus Package (American Recovery and Reinvestment Program) Contribution Limits for 2008 and 2009 401(k)'s 2 Tips to Lower your Monthly House Payment Tax Stimulus Rebate for 2009 Stop Impulse Purchases (Buying) Chart of Debt Snowball (Affects of Exponential Decay on Debt Snowball) Call Your Telemarketer (Highlights for Children) - Is This How Bad the Economy Has Become? How to Increase Your Credit (FICO) Score in Four Easy Steps Questions to Ask Yourself Before Filing for Bankruptcy Helping Family and Friends (and Protecting Yourself) During the Credit Crunch Refinancing Your Home 3 Great Ways to Pay Off Debt Exponential Decay and the Stock Market 2 Methods for Creating an Effective Budget How to Manage Unpredictable Income