Swarming Sharks

Recent volatility in the stock market and abnormally low interest rates at your bank have brought the financial sharks back to the surface.  There are always plenty of sharks swarming in to offer their bait whenever people have a high desire, fear, or need for something.  Let’s go over some of the things to lookout for from those wanting to take advantage of you, and what to watch for within yourself.

Not everything is an all-out scam.  Putting all of your money into a CD or annuity could actually be harmful to your financial health.  Your money could die a conservative death.  Most people need the proper mix of low risk and some high-risk investments to have their money last a lifetime.

I will admit that I have been scammed myself a couple times early in my investment career.  It taught me a lot about myself and what emotions to guard against.  I also learned some invaluable lessons on investing that help me excel today.

I’ve learned a lot on how a scam artist thinks and acts.  They are usually a narcissist that you would describe as very engaging and fun to be around.  Their attitude is that people are desperate and should know better, so they deserve what’s coming to them.  That it’s actually the fault of the one getting scammed for being desperate.  They feel they might as well be the one scamming you.  If they don’t, someone else will.

Worse can be the salesman that actually believes what they are doing is good, when it isn’t.  How does an advisor who sells an annuity in 2009 with all of someone’s stock market money feel today?  Maybe they were needing to put food on their table, or in a negative place themselves that it clouded their own thinking?  Scam artist, or even more mildly put, someone more focused on their reward than yours, either prey on your desire or your fears.  Sometimes, even more dangerously, they prey on both.

The recipe for a good scam is to not be outlandish.  That would cause too many people to run.  More often, what they offer is something that sounds better than you have found anywhere else.

You also want to beware of free meals being offered to listen to an investment opportunity.  There are plenty of trustworthy events being held in this manner, but I’d suggest the majority are going to be high powered sales events that make it difficult to leave without signing the dotted line.  They’ll prey on the obligation you feel from the free meal.  By all means you can attend one of these events, but don’t commit to anything on the first day.  That’s when emotion and sales pressure are the highest.

Great high-risk investment opportunities are usually only sold to accredited investors with a very high net worth.  If someone is selling a high return investment opportunity to someone with a net worth under $1 million, the chances are their intentions are bad.  If it’s a penny stock, it is important to examine the management for past success

Ask yourself some questions:

  • Does this seem too-good-to-be-true?
  • Is fear driving me to make this decision?
  • Am I hoping too much for this to be true?
  • Am I being rushed or pressured to decide?
  • Is this being sold as a “special offer”?
  • Am I disregarding some red flags that my mind is raising?
  • Have I asked someone I trust their thoughts?
  • Am I too scared to even ask someone about this?

These simple questions should give you the answers you need to determine if you are about to get yourself trapped in a scam, bad investment product, or simply a bad decision for your situation.

Here’s some irony for you.  We are having a free breakfast at City House on November 17, at 8:30 a.m. if you would like to see what we are saying about this current market environment and what options you have available to you.  It will be more about empowerment.  We won’t allow anyone to sign anything at the event, because we won’t be selling anything that day.  It’s purely an information event, and we’ll even offer a free consultative follow-up of a financial plan.  This will help answer if you are saving enough or spending the right amount in retirement.

November 7th, 2018|Categories: Investment Management, Resources, Retirement|