4 Investment Abuses to Be Wary Of

Jacob Maslow  |


When you hire a professional investment advisor of any ilk, the implied expectation is that they always have your financial interests at heart. The danger in that thinking is that you might miss important red flags that indicate investment bad faith. Another dangerous investment mentality is to skip looking into a company’s public financial reports yourself. Here are 4 investment abuses to always be on the lookout for.

1. Inflating Fund Performance

It’s always important to perform checks and balances on any institution that will control any portion of your portfolio. Don’t automatically accept a broker/dealer’s word that a fund is “exceeding expectations.” Even though inflating fund performance is an illegal practice according to the SEC, some unscrupulous entities do engage in this practice. Take a few minutes to review the facts yourself. If anything’s been grossly misrepresented, walk away.

2. Leveraging Emotions to Manipulate Your Decision

You might feel it’s a bonus when you’re friends with your financial advisor. Over time, it’s natural to form a close bond with a professional who is intimate with all your finances. But often, this bond can be taken advantage of to force your decisions one way or the other. you might find yourself in a position where you’re being asked whether you trust their judgment or not. If your financial advisor ever tries to manipulate your decision by calling out your friendship, it’s time to start shopping for a new advisor—and possibly a new “friend.”

3. Investment is Guaranteed

First of all, there’s no such thing as a guaranteed investment. Even if you’re doing a lucrative private money lending deal, any of the players could default, leaving you either with no return or a complete loss of your principal. In investing, there’s high risk, medium risk and low risk. But make no mistake; there’s always risk. If your financial advisor or anyone else makes claims of a guaranteed investment, pass.

4. Claiming You Have No Retribution Rights

Finally, one of the most common investment abuses is when victims are told they have no retribution rights. You may indeed have claim to retribution, but you aren’t going to hear about it from the entity that scammed you. If you suspect you’ve been played, contact an investment attorney with a proven track record of winning investor claims.

Investment abuse is more common than you may think. Part of being a savvy investor is to be aware of these abuses so you can protect yourself and your financial future.

DISCLOSURE: The author does not have any stake in the listed equities


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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