Nineteenth-century business mogul and showman Phineas Taylor Barnum knew a thing or two about the psychology of pulling the wool over peoples’ eyes. Although his aim was to entertain rather than scam, it’s worth bearing in mind some of his wisdom when deciding whether an investment opportunity is just that, or a scam designed to bleed you dry financially and leave you with nothing.
How to Spot an Investment Scam
Is It Too Good to Be True?
As a general rule, if something seems too good to be true, it is. A clever scammer will often go for the outrageous claim to make the investment scam seem more credible, and use flattery to sucker you in. For example, look out for suggestions that the inflated profits and benefits have to be true, because an investor as intelligent as you are would never be fooled by something that isn’t the real deal. If it walks like a duck, and quacks like a duck, then it’s probably a duck – take the hint and duck out!
“Every crowd has a silver lining.”
Like everyone else with an email address, you’ve probably had countless unsolicited requests to invest, offers to send a few hundred dollars to receive an ATM card with a million dollars on it, and variations on a tale of being someone’s only living relative. You might think “how could anyone ever fall for that?,” but the truth is that people do—if you spread a scam far enough there will always be someone naive enough to believe that this is a genuine approach, and they could end up thousands of dollars poorer because of it. If this ‘one-time offer’ appears regularly (Google is your friend here), or a ‘limited space investment’ is being offered to thousands of other investors, it isn’t what it seems. Hold on to your money.
There's a sucker born everyday.
Sometimes, the scammers are clever; the credentials check out, either because someone else’s identity is being used to front the project, or because they’ve managed to be enough of a cuckoo in the nest that their scheme or investment looks just like a similar, completely legitimate deal. Watch out if a friend or long-term business contact makes the initial approach, especially if there’s considerable urgency about you putting your cash in. They’ve probably been suckered in with promises of extras.
Do you really know the business?
Barnum knew a thing or two about doing your research, and that’s just as easily translated to investments; it’s reasonably safe to say that the most secure medium-term investment is still property, and particularly property that doesn’t need your financial input beyond the purchase, and will give you returns immediately; the turnkey investment.
The best thing about turnkey property investments is that once your research has identified the best managing agents in the business, you know that your investment is going to be as secure as possible. Look for a property management company that specializes in turnkey properties, and who will act as a managing agent for everything from collecting the rent to painting the front door.
Investor forums and groups will be a great source of help to you – who knows, you might even be able to stop someone else losing their investments along the way.
Talk to one of our investment specialists to learn how JWB can help you earn passive income through long term real estate investing.