RE: Crypto carnage23 May 2021 18:01
continued..
Low risk, high returns: If you're presented with any investment opportunity that's described as offering very low risk and very high returns -- or, worse, that's "guaranteed" to deliver high returns, beware. In general, high potential returns are linked to high risk. That's just how the financial world works. Lottery tickets? High risk, high reward. Government bonds? Low risk, relatively low reward.
Very consistent returns: If you're offered the chance to invest in something that sports very consistent returns, take a closer look. Know that the stock market has always tended to go up over many decades, but from week to week and even year to year, its results are lumpy. Check out the S&P 500's returns over recent years in the table below. Clearly, any investment tied to the stock market is likely to feature varying returns. If you see returns that hardly vary at all, that should raise questions.
Unregistered investments: When you invest, you should want whatever you park your hard-earned dollars in to be an investment registered with the SEC or with state regulators. As the SEC explains, "Registration is important because it provides investors with access to information about the company's management, products, services, and finances." Look into the registration status of any investment opportunity you're offered and don't just take the seller's word for it.
Unlicensed sellers: Speaking of sellers, know that people and companies in the investment business should also be registered, or licensed. It's required by federal and state laws. Verify the status of anyone you're dealing with.
Complex and secret strategies: Another hallmark of many Ponzi schemes is that they feature complex and/or secret strategies. That's because, as they're fraudulent, their true nature shouldn't be apparent. It's common for you to be told that the amazing results of the investment are due to a secret investing strategy. Alternatively, you may be given an explanation that's too cryptic to understand -- possibly because it really doesn't make sense. Being too trusting can get you in trouble.
Paperwork problems: Solid investment companies tend to have solid reporting systems, issuing statements to you regularly. The statements tend to be relatively easy to understand and free of errors, too. If you're not getting statements on time or if you're spotting any errors or confusing things in them, that's not professional or reassuring. Take a closer look and ask questions.
Difficulty receiving payments: The SEC's last red flag is this: If you experience any trouble trying to withdraw money or you're not receiving any promised payments on time, you may be involved in a Ponzi scheme. Some investors who try to withdraw funds are urged to leave their money in place and in exchange are offered even better returns. Be critical and wary.
Sign In
Follow the stocks
