Investment Scams: 7 Warning Signs

Investment ScamsLooking to avoid 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. Investment scams abound. Here are 7 tips to help you keep from getting snared by their devious tactics.

1) “O, What a Tangled Web We Weave When First We Practice To Deceive”

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 sales hype? If they claim returns more than 100% ROI per year, watch out! You might have come across one of many investment scams out there. Stay away from sites that have no phone number. Go to or to find domain ownership and age.

Google the company name or individual names with words like investment scams, 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 investment 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 investment scammers. 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! Investment Scams

Pump and dump investment scams 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 some people who run investment scams 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. Not all strategies are investment scams! The key is a solid, documented track record with a decent history that shows warts and all.