Guest Blog – “Due Diligence” is a “Must Do” for any potential investment

In today’s fast paced, electronic world, time is money. The urgency to get things done, and then move on to the next task is palpable. Unfortunately, decisions related to evaluating a potential investment require time and due diligence. If the proper homework is not done or the necessary questions are not asked beforehand, then the probability of a substantial loss or, at best, a mistake is dramatically increased. Never rush into any investment program without doing the proper review on the front end.

The Internet has been the great facilitator of many new technologies over the past decade, but it has also lulled us all into a false sense of security. We hear of fraud and identity theft, but we never think it could happen to us, until it does. Our trust should not be so freely given. We must teach ourselves to be more skeptical and aware that something as simple as an investment proposal may either be totally wrong for our situation or may be an outright scam. Accept you personal responsibility!

After awareness and skepticism, the focus shifts to market access, your broker/dealer. Brokers come in three varieties, reputable, questionable and unscrupulous. The latter two must be avoided. If you intend to invest in currencies, be especially careful. The Internet provides a cloak of anonymity that an unscrupulous Forex broker can use to his advantage. Currency traders must verify that their broker is legitimate, hopefully onshore, and fiscally responsible. All investors should learn from the lessons in this industry. You must check references, credentials, and reviews, and invest the extra time to determine that your broker is sworn to serving your best interests.

Securities fraud is big business in every part of the globe. Here are a few of the more common warning signs that demand your attention and skepticism:

• High Yield Investment Program (HYIP): Beware of any investment program that promises high monthly returns. If it sounds too good to be true, you know you should ignore it;
• Little or no Risk: Investing is all about managing risk. Every investment involves some risk, more if the potential for returns are higher;
• Urgency: The scam is always about the “sell”. Beware of the salesman that pressures you to sign and send money. Sleep on it, and take your time;
• Overtly Impressive: Swindlers require your confidence. They will dress appropriately, have professional looking offices and websites, and appear very successful. Bernie Madoff was of this genre. Do your homework;
• Question Referrals: Ponzi schemes depend on your trusting a referral from a friend or a satisfied client. Do not commit all of your savings at once;
• Unsolicited Offers or Tips: Be very wary of these. They could be a “pump-and-dump” scheme or outright fraud. Once again, do your own research;
• Complicated Investments: Crooks love to sell these because the unwary immediately accepts their voracity in order to avoid appearing foolish. If you do not understand it, leave it alone;
• Questions: If the broker avoids questions or a third-party review, your attorney for example, then you know something is askew;
• Nothing in Writing: Swindlers do not want you to have anything that you could use against them later. They want your money now.

Investment fraud is real and well organized. Check your broker for safety and soundness. Be aware and skeptical of the common warning signs of fraud. Do your own research on every potential investment, maintain caution above greed, and remember that you are in charge of your own financial future.

Guest Writer Cesar Zambrano also writes for ForexFraud.com which aims to help investors to avoid scams relating to trading in commodoties and foreign exchange markets. We would like to thank Cesar for his useful contribution to our blog and for his financial contribution which will be used to support our work.