With the start of the new year, many people will resolve to improve their financial security by taking advantage of investment opportunities. To steer clear of risky ventures, the Better Business Bureau is urging would-be investors to carefully evaluate the investment product or program, its promoters and its sales pitch.
Every day, BBBs hear from consumers who invested in what they thought were solid and sure money-makers. They abandoned their common sense and succumbed to enticing promotions that were short on details but full of dollar signs, said Steve Cole, president/CEO of the Council of Better Business Bureaus.
According to Dennis Horton, director of the Better Business Bureau of Chicago and Northern Illinois Regional Office in Rockford, investment schemers frequently try to peddle products using sales pitches that are tied to the headlines.
Recent suspect promotions include oil-and-gas schemes (higher gas prices are on everyones mind), bird flu stock scams (from companies claiming to have products to fight bird flu), get rich quick real estate investment seminars (to take advantage of soaring housing prices), advance stock notifications for Mexico-based companies (to serve growing Hispanic populations), and investment pools (to help hurricane and tsunami victims).
To avoid faling victim to fraud, the BBB advised investors to be particularly cautious of any of the following red flags:
Words like risk free, guarantee, high return, or limited offer. According to government regulators, no financial investment is risk free and a high rate of return means greater risk.
Offshore scams and investment opportunities in other countries, particularly if they claim to be tax-free and confidential. If you send money abroad and something goes wrong, it will be particularly difficult to locate your money.
Promises of quick profits or fast cash, ground floor opportunities, offers to share inside information, and pressure to invest immediately because the market is moving.
Before making an investment decision, get the facts in writing, said Horton. At the very least, you should obtain and verify the following information.
If the investment and seller are licensed and registered. Check with the U.S. Securities & Exchange Commission ( www.sec.gov) and the state of Illinois securities agency ( www.cyberdriveillinois.com/departments/securities/).
If there is a record of complaints about the promoter or the investment company at the BBB, the SEC or the state securities agency.
The costs to buy, hold and sell the investment.
The risk that you could lose the money you invest.
The rate of return to expect on your money and when.
The companys headquarters location, how long it has been in business, and its product or service.
What the promoter is being paid to tout the investment opportunity.
In addition, the BBB advised investors to always request and carefully read through financial information about the investment, such as a prospectus, annual report, offering circular and financial statements.
Compare the written information to what you were told online. Watch out if you are told there is no such information available, the BBB director said.
From the Jan. 18-24, 2006, issue