What is an Investment Scam?

All forms of investing, whether you’re a long-term spender on stocks and securities, or someone trading Forex on a daily basis, come with risk. However, it’s fair to say that some investment activities are riskier than others. We’re not just talking about the difference in risk level between getting involved with a mutual fund or a cryptocurrency scheme either. Getting involved with stocks and shares from un-regulated companies on markets without as many rules as the NYSE and other official exchanges is naturally more dangerous than using secure investment avenues. If you’re going to be spending your money on strategies to help build your wealth portfolio in the long-term, you’ll need to ensure you understand the concept of investment scams first.

Defining Investment Scams

The definition of an investment scam has been difficult to nail down in the past, because many people claim they’ve been scammed with an opportunity, when they simply failed to do the correct research. A true scam hap-pens when someone offers you a convincing, but fake opportunity to make a profit, provided you hand over some cash in the short-term. While some scams are very easy to spot, like a person you’ve never heard of asking you for $1000 in exchange for $2000 next year, others seem very legitimate, and can be very complex. Some people assume penny stocks and investment scams are the same thing. However, this isn’t the case.

Penny stocks have been frequently connected with scams in the past, because many people used to use these offerings on unregulated environments as a way to generate money. They would give people tips on which stocks to invest in, pump up the price, and then leave investors without anything. Of course, there are also some high-quality opportunities out there too and you can review a watchlist of penny stocks to help you start out in the market. Like with most things, the key to success is doing your research.

How to Avoid the Scams

While it’s not possible to completely eradicate all risks associated with investing when you’re building your portfolio, you can reduce your exposure to certain risks – like scams. The easiest way to protect yourself is to stay away from any products involving unregulated markets, which aren’t covered by the rules of your country in relation to investing. The other most important thing you can do is simply do your research. The more information you gather about each potential investment you’re going to get involved with, the easier it will be to separate potentially dangerous offerings from genuine opportunities.

As you work on your skills either as a long-term or short-term investor, you’ll begin to recognize evidence of scams much more easily. However, while you’re still learning, remember that caution is always important. Never trust anything that seems too good to be true, and never take someone else’s advice as gospel. If you commit to always doing your own research and double-checking your sources before you spend any money or sell an asset, you should be able to protect yourself from some common scams.