A scam can take the form of anything from a business that is not what it claims to be, to a misleading statement or an overpriced product. It usually involves deception in which someone tries to trick you into parting with your money. It could be a person or an organization trying to profit from your gullibility, or just someone breaking the law by committing fraud or theft. Read this guide on how to avoid scams and protect yourself from picking up the wrong investment.
What is a scam?
There are many types of scams out there. They come in all forms and sizes, all different flavors, and all have the same goal: to trick you into parting with your money.
Here are some examples:
Scam #1: A business that says it’s a good investment but isn’t what it says. This scam can be a pyramid scheme or a Ponzi scheme where members get paid back larger sums of money each month than they put in. The idea is that if the members make enough money, they’ll be able to buy out those who started with them (like a pyramid). Once this happens, everyone gets paid back much more than they put in.
Scam #2: A business that’s not actually for sale but offers you a way to become part of it—in exchange for your hard-earned money or credit card information. You’re then asked to invest more of your own cash to be part of the company—failing over and over again as you try to do exactly what it says on the tin.
Scam #3: A business that asks you for personal information such as your name, address, phone number, and credit card details so it can sell you something similar or better elsewhere
How do you avoid a scam?
Recognize that scams can take the form of a business opportunity. No matter what you buy or do, it’s important to be completely aware of what you are doing. If you think something is too good to be true, don’t risk your money by investing.
If someone asks you to invest in his or her business and they claim they have the know-how or resources that will benefit your business, ask yourself how credible their claims are. Read this guide on how to keep track of potential scams in your area.
There are also scams that target people on social media — beware if you see anything suspicious. This is especially true when there is a large number of users sharing the same information or using similar hashtags.
You also need to be wary of companies trying to entice you with very expensive products and services without any real evidence behind them: There are scammers who make big promises only to disappear once you’ve paid them for their product or service. Your financial security should always come first and it’s important not to put too much faith into the promises made by unsolicited sales calls and emails from unknown sources.
How to protect yourself from scams
Scams can be hard to avoid. While some people seem to be predisposed toward falling for scams, others can become easily fooled by deceptive marketing or misleading information. In fact, one in four consumers is victimized by a scam each year and that number climbs as the cost of goods increases — meaning that even if you will never have to pay a penny to feed your family, you are still at risk of being scammed.
But it’s not just a matter of potential scams; it’s also important to protect yourself from fraud and theft when investing in cryptocurrency (e.g., Bitcoin, Ethereum).
Avoiding bad investments
You can only invest in one thing. And don’t let your investment go bad. Investing in a scam or a company that is not what it claims to be, will waste your money and make you vulnerable to financial loss. Here are some of the most common scams and which strategies you can use to avoid them:
You might think that investing in a company that’s not what it claims to be an investment opportunity. This could be true, but always be very careful when doing research on any company, before you invest. You should always look for forward-looking information, such as earnings or revenue projections. If the company has never made any real money, then it’s probably not worth investing in at all. Never overlook this important step when looking for an investment opportunity!
Avoiding financial scams
When it comes to financial scams, there are three common types:
* Ponzi schemes. This type of scam is a pyramid scheme where the money is paid back to new investors rather than used to pay out current investors. The more you invest, the more you get in return. The higher your investment level, the greater the rate of payback.
* Pyramid schemes. In a pyramid scheme, new investors are enticed with promises of profit and opportunities that are not available to those who have already invested in the program. As they invest, they slowly build up their wealth while other investors become discouraged when they realize that they are not getting any extra returns on their investments.
* Investment scams. A variety of investment scams take advantage of people’s greed or lack of knowledge about investing and can easily fool them into putting money into bad businesses or products that promise high earnings but end up losing value over time as interest rates rise and markets crash (see our guide on how to avoid investing scams).