Articles > Investment Basics

» Investigate before You Invest
by: Larry Westfall


In today’s complex financial world, there are many investment opportunities. Potential investors find themselves solicited by telephone calls, mailings, and even through their computer information systems. Some investment opportunities hold great promise of financial return; others do not.

No matter how you choose to invest your money, a degree of risk exists. The greater the “promise” of a return, the riskier the investment is. Often, the investment that sounds like a sure winner is the invention of a con artist and should be avoided altogether.
Each year, investors lose millions of dollars to securities and commodities fraud. High-pressure salespeople promoting get-rich-quick schemes sell more than three-fourths of all investment frauds over the telephone. With their slick sales pitches, con artists will try to cash in on just about any type of investment.

The techniques practiced by these swindlers are well rehearsed and often hard to resist.

Your best protection: Investigate before you invest.

RISKY INVESTMENTS: BEWARE
Both legitimate brokers and con artists offer many investment opportunities. A legitimate investment can offer excellent returns, while a deal with a con artist is guaranteed to result in financial loss.

Con artists commonly use the following techniques:
* They promise a rate of return better than similar investments are paying.
* They guarantee that the investment will not fail.
* They insist that the opportunity to invest exists today only - tomorrow will be too late.
* They promise to send someone to your home to pick up the funds today.

HOW CAN YOU INVESTIGATE
Before you invest, investigate the company, the salesperson, and the investment by asking questions and checking references.

You should thoroughly understand the investment before you invest.

Do not be afraid to ask questions and write down the answers for future reference. Some of the most important questions you should ask the person selling the investment are:

* What are your name, your firm’s name, and your telephone number?
* How did you get my name?
* Are you and your firm licensed with the Business Registration Division of the Department of Commerce & Consumer Affairs to sell this investment?
* What are the risks of this investment?
* Can you send a prospectus or other offering document telling me the details of the investment? (Keep all written materials provided.)
* How much commission are you receiving on this investment?
* What statement or other documents will I get regarding this investment, and how often will they be received?
* How do I liquidate my investment?

Smooth-talking con artists will have answers to your questions. They may or may not be true answers. Therefore, it is important that you do some further investigation by doing the following:

Call the local
Better Business Bureau
Or your local law enforcement agency to see if they have received any complaints about the company, the salesperson, or the investment.

Check with the State
Office of the Commissioner of Securities
See if the firm or salesperson is licensed to sell investments in your state. Also, ask if the investment is registered for sale in your state.

Contact the
National Association of Securities Dealers
On their toll-free, hot line to get information about the firm and the salesperson.
* Are you and your firm licensed with the Business Registration Division of the Department of Commerce & Consumer Affairs to sell this investment?
* What are the risks of this investment?
* Can you send a prospectus or other offering document telling me the details of the investment? (Keep all written materials provided.)
* How much commission are you receiving on this investment?
* What statement or other documents will I get regarding this investment, and how often will they be received?
* How do I liquidate my investment?
Smooth-talking con artists will have answers to your questions. They may or may not be true answers. Therefore, it is important that you do some further investigation by doing the following:
1 (800) 289-9999.
(9 a.m. to 5 p.m. EST)

Phone the local
Securities Enforcement Branch
See if their office has received any complaints about the company.

Let us work together to stop investment fraud before con artists take another victim.

Unfortunately, very few victims will ever again see a cent of their money. Swindling will continue as long as unscrupulous promoters prey on unwary investors.

The best way to stop investment fraud is to prevent it from occurring.

Do not be afraid to ask questions and to investigate investment opportunities before you invest.


About the Author
Larry Westfall is the owner of DIY Investing - http://www.pennystockebook.com

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