Stay Away from Investment Scams and Frauds by Improving Your Knowledge About How Various Scams Work
An integral aspect of financial management
involves taking right investment decisions so that you can protect yourself from losses and probable frauds. The main topic we will be covering in the following sections involves around protecting investors from different fraudulent schemes. As such, we will be looking at common fraud scheme fraudsters utilize to scam investors.
Investment Scams/Frauds Investors Need to be Wary of
Few of the investment frauds we will be looking at in the next few sections are equity milling and Ponzi schemes. Thus, if you want to implement proper financial management
and protect your funds then you should pay close attention to how such fraud schemes work.
You need to consult an experienced wealth manager to understand how equity milling works so that you can recognize them when making any investment decision or selecting any particular financial product.
In this type of fraud scheme, a promoter searches out undervalued properties and then uninformed investors are enticed to buy them. Moreover, scammers also carry out a fraudulent appraisal of such property with the aim of showing a higher value for such property. This higher appraised value is then used for availing a loan and then that property is sold to another person.
This way, investors get equity which is the difference between higher appraised property value and the lower price investor has to pay for buying the property.
Fraudulent promoters lure investors by offering such equity milling as one form of investment program as well as a means of financing other investment opportunities.
Let us now go through another situation where you will find scammers utilizing equity milling to rip-off your hard-earned money.
A scammer may also make use of any home's equity for borrowing money and after that, the money is utilized for buying a car. But, amount scammer borrows is generally more than what he has to pay for purchasing the car. This difference between borrowed amount and purchase value of the car is then utilized to make an investment.
The basic idea in equity milling is to entice investors with a rate of return that is comparatively higher than what investor has to pay in the form of interest on the loan so that the investor will earn more profit from such investment.
The main concern here is that many times these transactions do not have associated disclosure documents, making them a lot riskier in comparison to other forms of investment.
In addition to it, promoters also give wrong information about risks you as an investor will have to bear when making such investment.
Here investor is given high returns from funds scammer receives from other people who are starting to invest in the fraudulent scheme. A common feature of these schemes you need to be wary of are:
• There is no real asset or financial investment
• Fraudster makes false claims about presence of such investment
The Bottom Line
As we can see there are different types of frauds that you need to be aware of to protect your funds and make investments which will provide desired results.