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8 Red Flag Investment Tips You Should Avoid

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8 Red Flag Investment Tips You Should AvoidXavier Lorenzo - Getty Images

One of the best ways to amass wealth over the course of your life is to make smart, sound investments. While investing often requires taking risks to varying degrees, the risk you never want to take is acting on bad investment advice. Poor investment choices can mean the difference between growing your life savings and losing it all, so it’s important to be educated about where you’re putting your money.

Beyond being mindful of how you invest your hard earned cash, it’s important to be on the lookout for investment fraud. There are a number of scams framed as investment opportunities people use in an attempt to steal your money. Remember these red flag investment tips so you can avoid scammers and protect your assets.

If returns sound too good to be true, they probably are.

When considering any investment, if you’re being sold on the promise of returns that sound too good to be true, buyers beware. Good investments aren’t marketed as a way to get rich quickly; the opposite is more commonly true.

stack of coins bottle
Inverse Couple Images - Getty Images

Pressure to buy is a no-go.

You should never feel pressured to make an investment. If a salesperson is laying it on thick, it may be a sign that something isn’t quite right.

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Marco VDM - Getty Images

Unsolicited offers to invest are always scams.

If a stranger approaches you out of the blue with the promise of an investment opportunity, chances are it’s a scam. Avoid making investments with anyone you don’t already know and with whom you don’t already have an established relationship.

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Oscar Wong - Getty Images

The company promises guaranteed returns.

Any seasoned professional will tell you that in business, there is never a surefire way to guarantee returns. Investing always comes with some degree of risk, and the promise of a return is definitely a red flag.

close up of someone hands holding and counting american dollar banknotes in her hand
Boy_Anupong - Getty Images

You aren't provided a paper trail.

Before investing in any company, you should be given the opportunity to review its financial statements and other relevant documentation. If these materials aren’t made available to you, you’re either dealing with a disorganized business or a fraudulent one.

asian women working with invoices, calculates expenses doing work at home
staticnak1983 - Getty Images

Your salesperson isn't properly accredited.

If the salesperson you’re interacting with doesn’t have a license and isn’t registered, there is almost assuredly fraud afoot.

couple talking to financial advisor
Greg Hinsdale - Getty Images

The company isn't in Good Standing.

The company that is seeking your investment should be in good standing in the state where it was incorporated, which indicates that it pays and files annual taxes. Be wary of any company that is not listed as in good standing.

business finance technology and investment concept
Teera Konakan - Getty Images

You can’t verify the background of a salesperson, manager, or promoter.

It’s easy for scammers to lie about their backgrounds and experience. Don’t just take their word for it– do your own research to confirm that the person you’re interacting with has the credentials and track record they claim to have.

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Jasmin Merdan - Getty Images

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