Investing money is one of the leading ways to build wealth, which can be used for retirement and other significant projects. You are probably familiar with the concept: making contributions to your retirement fund or employer plan over time can help you far into the future.

A key point to remember is that investments also carry risks. That is, assets can lose value and are subject to market forces. We have a primer on some investment vehicles to better understand the basics of investing.

These days, you may have come across ads or messages that make bold claims of low-risk, high-return investments. They may be pitched as many things, like:

• Cryptocurrency offers
• Low-risk, high-return investments
• “Turnkey” real estate listings
• “Get rich quick” courses and training
  

These and many more offers flooding your feed, inbox, and messaging apps fall under a broad umbrella known as “investment scams,” schemes where fraudsters promise huge returns in exchange for money or private information. All too often, these grand promises end up leaving victims out of their hard-earned savings.

Markets are constantly in flux, and scammers love to take advantage of people’s fears of uncertainty. Therefore, it is important to understand how to identify investment scams to avoid the bad end of a supposed deal. Here’s what you can do to protect yourself.

Common Signs of an Investment Scam

At its core, an investment scam will try to sell you on the idea that you can get rich quickly or make a lot of money with little to no effort. In essence, it makes a big promise and even tries to present it as a guarantee or “sure” thing.

Investment scams can be particularly attractive because they are emotionally manipulative. Imagine taking an exit to easy street, and the turn-off is right before you. On top of that, there is also a “fear of missing out.” If you don’t take an investment opportunity now, you may miss your chance to that always out-of-reach “good life.”

Regardless, steeling yourself against fraudsters who pitch investment opportunities is essential.

Investment scams are prevalent in spam emails, messages, and social media (both in ads and posts boosted by users). Here are some common warning signs of a scam, provided by the Federal Trade Commission:

• Promises of big money, guaranteed income, or profits
• Promises of an investment requiring little risk, time, or effort
• Details of the opportunity are sparse or unclear
• Claims of a “secret” method or proven revenue-generating system
  

Spotting any of the above characteristics when looking over a supposed investment are red flags. You would do best to steer away from any offers making big promises.

Investment Scams Are a Variation of the Imposter Scam

Remember one of the telltale signs of a scam? People may pose as experts or claim to be in a position of authority before pitching their offer. In this way, an investment scam operates much like an imposter scam.

Another thing to look out for is the personal nature an investment scam may take. Charles Schwab warns their clients of “pump and dump” schemes, where scammers trick people into buying a security at an inflated price before it crashes, leaving victims with drastically devalued assets.

Pump and dump scams are notorious for generating a fear of missing out. Scammers create fake personas on social media (or even impersonate established firms) to lure victims into believing in the potential of an investment opportunity. Generally speaking, it’s advisable not to take investment advice directly from social media.

Another thing to look out for is how scammers may try to contact you personally to participate in a fraudulent investment. One very nefarious variation is the romance scam. A victim may meet a fraudster’s persona on social media or a dating app, where the fraudster manipulates someone into buying into an investment to get them out of a bad situation.

How To Avoid an Investment Scam

It can be very easy to fall victim to an investment scam, especially if someone is desperate to escape an unfavorable financial situation. Regardless, you should always approach investment opportunities clearly before deciding.

To avoid a majority of investment scams, the Federal Trade Commission recommends taking these steps:

• Resist the pressure to commit quickly
• Research investment programs
• Verify investment claims on your own
• Know the risks involved with investing
  

That last part warrants emphasis: All investments carry risk. The money and time you put into a portfolio, land, or other speculative asset has a chance to incur losses. Anyone who makes promises of a “sure thing” is probably lying to you, especially if they’re trying to reach you randomly from social media or your messaging apps.

You should speak with an experienced financial planner if you need assistance mapping an investment strategy. Speaking face-to-face with a financial professional can help you tailor a plan that best aligns with your goals and values.

Always remember the value of playing it SAFE when planning for your future. First Florida is committed to helping you fight back against scammers. For more information on the latest advisories, visit our Scam and Fraud Education page.