Investment Scam

What are the best ways to know whether something is an investment scam or not?

If they make big promises - like guaranteeing returns of 20% or more. No one can do that without lying or misrepresenting the numbers some how. When something sounds too good to be true, it probably is. The closest thing to guaranteed, sizable returns you can get is a promise to long-term gains in the stock market over 30 or more years of at least 7%. Even that is not 100% guaranteed -- more like 99.9% guaranteed. Making a short-term guarantee on returns should set off huge warning bells in your head.

You can also do a Google search for "[name of investing system] scam" or "is [name of system] a scam?" Don't trust just the first few links as those can potentially be manipulated. Check out several links and look for seemingly unbiased reviews. If they're raving about it and saying its the best thing ever, move on to the next review. That is likely someone who works for the scammers. What I would look for are people who can present pro's and con's about the system. If all I could find are rants and raves, I would assume that those were not real and placed there by scammers. Therefore, I would assume the system is a scam.

What is a good example of a current investment scam?

I've recently run across Forex trading bots. There are tons of them out there. Supposedly, you buy the bot and set it to automatic and you make 50%+ yearly returns. Every time I've seen them provide "evidence" with a test account that is constantly being updated. Seems full proof, right? The problem is these test accounts can be faked even if its a real account making real trades and being updated constantly. All they have to do is trade with theirself or a friend. They also don't account for taxes and commissions in their returns evidence -- which can take huge chunks out of gains.

Don't be fooled. There is no way someone can guarantee you 50%+ returns. Its just not possible. If they could get those kind of returns, they wouldn't share them with anyone and they would be a billionaire in no time. $10,000 at 75% annual returns turns into $2.6 million after 10 years, $725 million after 20 years, and $200 billion after 30 years. Why would they need share it with you? They'd be on the path to super rich without taking an extra $200 from people and risking their own returns.

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