7 Warning Signs of Bogus Investment Strategies

Investment Scams

Genuine traders and successful investment strategy firms don’t have anything to hide. They are comfortable with losses because they know that’s part of the business. Their track records show all losses. They know their weaknesses and strengths well, and will readily admit both in the interest of transparency.

However, there is a seedy underbelly of the investment world that tends to offer bogus investment strategies. Here are 7 tips to keep you from getting snared.

1) “Who Art Though Creating Bogus Investment Strategies?”

Often your first point of contact with a company is their website. Does the site look professional but offer very generalized “about us” information? Are there outrageous claims and bogus investment strategies they’re trying to sell? If they claim returns more than 100% ROI per year, watch out! You might have come across a scam. Stay away from sites that have no phone number. Go to WhoIs.net or BetterWhoIs.com to find domain ownership and age.

Google the company name or individual names with words like scam, review, ripoff, fraud, SEC and CFTC. Keep in mind, however, that a nasty review doesn’t always mean the company is bad.

2) Liar, Liar, Pants On Fire

Some scammers hire shills to write fake reviews. These reviews are vague and may lack specifics about the trading system or investment strategy in question. The grammar may also be poor.

If you find reviews on other websites, copy and paste a sentence or two directly into Google. If you see many identical review results, it’s possible that the review is bogus, and is being promoted on bogus review websites to push down real reviews.

3) The Ol’ Switcheroo

Bait and switch is a very common ploy among fraudsters. The company presents one track record using a certain strategy that worked years ago, but no longer works now. After you sign up, you receive signals based on an entirely different strategy.

4) Pump It! Dump It!

Pump and dump schemes are popular in the penny stock world. You receive a newsletter or email telling you that a certain stock is about to explode. The newsletter is jam-packed with images and graphs and “facts” about why this stock is going to the moon. Buy! Buy! Buy!

The reality is that the scammers behind bogus investment strategies already own the stock and are looking for naïve buyers so they can exit the stock at a higher price. A few months after you buy the stock, the share price drops substantially, and you end up with a worthless asset or end up selling for a loss while your broker makes a hefty commission.

Investment Ebook

5) Real Track Record, Where Art Thou?

Other scammer warning signs include no track record at all, no recent track record, a track record that shows large time gaps, a track record with no losses, or a track record that covers a very short period of time. The original track record may show deep draw-downs (losses) or even catastrophic system failures.

6) “Domo Arigato Mr. Roboto” Track Record

One tricky tactic is to display a track record that seems to be genuine at first glance. However, as you study each trade, you realize no human could actually execute the trades. There might be hundreds of trades that each make just a few pennies or dollars. The reality, in most cases, is that broker commissions and slippage would destroy your profits.

7) “I’m Too Cool For Trading. Now I Just School.”

If you do get a “trading guru” on the phone and begin to ask specific questions about his track record, he may get defensive or change subjects. One common ploy is to explain away his track record, or lack of one, by claiming he now is an “educator.”

Traders & Investment Types Are A Strange Brew

Before you write off all traders and investment gurus, please know there are exceptions! Traders and investment types aren’t always the best marketers. Sometimes their websites are lousy – but not on purpose! They are just too busy trading and developing new investment strategies. They don’t always make time to update their website or track records, or gather testimonials and reviews from happy customers.

Be smart! Use your own discretion, and don’t throw out a good trading system or investment strategy simply because of a lame website or a couple negative reviews. The key is a solid, documented track record with a decent history that shows warts and all, without the bogus investment strategies.