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Pre-Investment Questions You Should Ask Before You Open Your Wallet

By: lar

Before investing, ask tough questions, both of yourself and those who are soliciting your investments. If the answer to any of these questions is "no" — or if the answers are vague or complicated — more than likely the investment being pitched is a fraud.

Is the company I’m investing in registered to sell securities?

Be cautious if the company selling you stock, assets, or partnership units has not registered its securities. Companies that register their securities file prospectuses and annual reports with securities regulators. If a promoter tells you that your investment is "structured" to exempt the securities of the company from registration, you may be dealing with an outfit that’s purposely avoiding contact with regulators.

Is it "too late" if I don’t invest my money now?

Using sales scripts, scam artists create the impression that only a few shares of stock or partnership units are left. They try to convince you that you’ll miss out on a big opportunity if you don’t send them thousands of dollars by overnight courier or wire transfer. Once you give your money to a scam artist, it may be too late to get it back.

Does the investment have a track record?

Claiming that their "opportunity" is similar to those of "hot" entrepreneurs, scam artists often use news stories about the success of legitimate companies as bait. Unfortunately, success stories of other companies in the field are irrelevant for your purposes. Get the track record of the company you’re considering investing in and the background of the people promoting it.

Where is my money going?

Legitimate companies account for investors’ money at all times. Ask for written proof of how much of your money is going to the actual purchase or development of the opportunity and how much is going to commissions, promoters’ profits and marketing costs. If most of your financial investment is slated to cover expenses and costs, much less will be available to earn a return. Telemarketing is particularly expensive; if you are investing in a telemarketed investment, how much are your brokers getting paid to talk to you?

Do I have an independent, knowledgeable, trustworthy person who can advise me?

Get an independent appraisal of the specific asset, business or venture you’re considering. An appraisal offered by the party selling the investment opportunity can be a fake. Talk to the previous owners of an asset or a business you’re acquiring for its value history. Discuss all investment ideas or plans with an accountant or an advisor you know and trust.

Do I know who I’m dealing with?

Can you find published information about the company in which you’re investing, proof that the company has registered the securities it is selling with a government agency (if required), or someone you trust who has heard of the company? Have you checked with your state securities agency to see if the promoter or sales person is licensed to sell securities in your state, if required? If not, be cautious. You’re giving your money to strangers.

Checking law enforcement agencies and Better Business Bureaus in the community where promoters are located is prudent, but not fool-proof. It may be too soon for the company’s victims to realize they’ve been defrauded or to have lodged complaints with the authorities. In addition, fraudulent promoters can lie about their name or their business history, or even pay people to be "references."

Can I tell a genuine company from a fictional one?

Don’t let appearances fool you. For a few dollars, anyone can incorporate an entity. Personal computers and desktop publishing software help scam artists produce slick promotional materials. Phone service providers can put toll-free telephone numbers in homes.

Did my sales representative tell me the risk of losing my money was high?

Sales representatives should tell you the risk of particular investments. Be particularly suspicious of sales pitches that play down risk or portray written risk disclosures as routine formalities required by the government. Believe the risk disclosures that say you could lose your whole investment. When your money is gone, fraudulent investment promoters often use "risk disclosures" against you.

Can I be certain a promoter is not lying to me?

Scam artists lie. Their success depends on having an airtight answer for everything. They inflate the costs and value of worthless investments. They promise you profits years down the road so you won’t find out that your investment is a scam until long after they’ve disappeared with your money.

Do I know when something is too good to be true?

Investing is risky business. Anyone who tells you an investment is likely to turn a profit quickly should have a basis for the claim. Demand written proof of profit projections from independent sources. Be especially wary when someone tells you profits will be big enough to offset the risk of investing. Every potentially high profit investment is high risk.

Article Source: http://www.articlebankonline.com

Larry Westfall currently has about 50 web sites – from article sites to Thailand web sites. He lives online and has been successfully marketing eBooks | casinos | credit cards | and Thailand hotel rooms. As a retired soldier he has a straightforward - no BS - shoot from the hip - attitude - which he now applies to Internet marketing.
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