The cons are pros.
There are sadly too many examples to recount. Bernie Madoff’s take ran to the tens of billions. Bayou Hedge Fund out of New Orleans created its own “independent” accounting firm (going so far as to forge office stationery) to hide a $450 million Ponzi scheme. And here in Akron, three now-convicted fraudsters plundered the venerable Fair Finance Company to finance their own lavish lifestyles.
The common denominator in all these cases is that innocent investors got ripped off. And no matter how many con men go to jail, there’ll be plenty more to take their place.
So how do you protect yourself? Start with this age-old defense: If it sounds too good to be true, it is. Any investment opportunity boasting of double-digit returns should be treated with great caution. Any that “guarantee” returns should be avoided like the plague (and probably reported to the Feds).
Next, do your own research. Learn everything you can before you invest. Talk to the firm’s employees and other investors. Check the Better Business Bureau and Attorney General’s office for outstanding complaints. And if the firm or fund references outside auditors, research the history and track record of those companies to be sure they’re legit.
Perhaps most importantly, think of all of your investments as risky propositions at best. Even Federally insured instruments, and securities listed on the major stock indices carry their own risk levels. Alternative investments might bring greater potential returns but their risks are commensurately compounded.
So invest with the same attitude with which you might go to Vegas: don’t gamble with money you can’t afford to lose.
The C4:
- As conventional investment markets get more and more shaky, more unconventional investment opportunities present themselves. All too many of these are cons, because con men know that investors are looking for alternatives.
- Caveat Emptor — let the buyer beware. Protect yourself before you invest. Be skeptical of all claims, no matter who's making them. Even friends and family, with the best of intentions, can rope you into a pyramid scheme. If it sounds too good to be true, it is. The greater return that’s promised, or even hinted at, the more skeptical you should be.
- Do your own research. Independently verify, through multiple sources, every claim. Check out the histories of all principals and associated companies. Talk to employees and other investors. Check the Better Business Bureau and Attorney General’s office for outstanding complaints.
- Finally, remember that investing always means risk. Don’t invest money you can’t afford to live without.
