4 Ways To Steer Clear Of Money Scams

4 Ways To Steer Clear Of Money ScamsYou work hard for your money, so you definitely want to keep as much of it around as you can for as long as possible. Saving for the future and earning interest on your money should be a top goal, but you want to be careful. All investments come with some risk, of course, but you definitely want to avoid flat-out financial scams that could leave you high and dry.

So how can you tell the difference between a good investment opportunity and a scam? Here are four shady money scams to avoid.

1. Internet Fraud

You know that Nigerian prince is never going to send you any lottery winnings, but are you aware of all the latest internet scams? If you think you could never fall for these, think again. Scammers are a lot more savvy now, sending emails that look like they’re from companies you trust and offering you the work-at-home job of your dreams.

To keep from falling for an internet scam, your best defense is simply to ignore any and all emails that ask you to provide personal information – especially if you don’t know the sender. Guard your information carefully, as even seemingly random personal tidbits can be enough to help someone break into your bank account or figure out your passwords.

2. Real Estate Investments

This one’s tricky, because real estate can be a great investment when you research carefully and buy something with good potential for growth. Real estate is a long-term investment in most cases, and it can take years for the value of your investment property to rise enough for you to profit.

If someone is claiming you can make fast, easy money in a real estate investment, steer clear. Flipping houses and investing in faraway property is risky at best, and a scam that could leave you broke at worst. If it sounds to good to be true, it probably is.

3. Oil Investment Scams

Drilling for oil and natural gas is booming business, but it’s always been a sector where prices spike and crash on a fairly regular basis. The energy economy is very complex, and you’d have to be a lucky type of genius to be able to time your investment perfectly to cash out with a big profit in most cases. Because they’re so risky, oil and gas investments usually only makes sense as a small part of your overall portfolio.

If anyone approaches you about investing in a speculative land deal or an oil well, be wary. Hard selling tactics and promises of ultra-high returns are a sign this investment could be more of a scam than a sound idea. If you’re interested in this area, work with a knowledgeable broker.

4. Ponzi Schemes

Remember Bernie Madoff? His famous pyramid scheme left lots of investors high and dry. A Ponzi scheme — or pyramid scheme — works when an unscrupulous manager promises high returns to get people to invest. They pay off early investors with the cash from newer investors. At first everyone is happy, but eventually there won’t be enough investors to continue buying in, and the whole thing collapses.

The best way to avoid being taken in by a Ponzi scheme is to carefully study the financial reports of any investment you make. You can also make sure you work with a broker or investment advisor who pledges to the fiduciary standard, which means they pledge to work in your best interests rather than to steer you toward investments they earn a commission on.

There are scams out there, but you shouldn’t be afraid to invest your money. When you work with an advisor you trust and make sure you fully understand your investment products, you’re unlikely to fall victim to a scam.

About The Author

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere. Catch her updates on Twitter @anumyoon!

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