Latest Investment Schemes
Four of the Latest Schemes Investors Need to Watch Out For
Many people who are approaching what was supposed to be the golden years
have been left scrambling to try and bulk up their retirement savings.
As nest eggs have dwindled and interest rates have remained low, some
investors are finding themselves victimized by fraud.
Scam artists target people of all ages, but according to the Northern American Securities Administrators Association, nearly 50 percent of investor complaints have to do with investment fraud targeting people age 60 and older. There are some precautions that you can take to minimize your chance of financial loss from an investment scam. One of the first steps is becoming aware of the latest schemes.
Below are some of the most current types of investment fraud, which were discussed in The Wall Street Journal:
- Life Settlement Securities: Life settlements are defined as a financial transaction in which the policy owner sells his or her policy to an investor at a discount to face value. These transactions have already been under heavy scrutiny, as there are high fees and aggressive sales tactics often used. A new problem has arisen though. Some companies are “securitizing” the life settlements, by packaging them together and using them to back the sale of notes. There is tremendous concern among regulators that these policies are being overvalued.
- Home Equity: Not everyone is upside down on their properties, meaning they don’t owe more than the house is worth. Some homeowners still have a considerable amount of equity and have therefore become a target of scam artists. There have been reports of homeowners who have been persuaded to borrow money against their homes that is then lent to limited liability companies or partnerships. They are offered steady returns, but unfortunately many end up losing their money.
- Alternative Energy: Alternative energy has become a popular investment category, as there is a big demand for “green” products and technology. While there are legitimate alternative energy investments available, there are also a lot of scams and it can be difficult to decipher between the two.
- Precious Metals: Investing in gold has gotten a lot of hype. There are newspaper ads and billboards boasting how investors can make money by purchasing gold. Scams have been reported where companies offer to purchase gold and store it for investors, only to find out later that the gold didn’t exist in the first place.
You can reduce the chances of becoming a victim of an investment scam by doing your homework. The Financial Industry Regulatory Authority offers a service known as BrokerCheck that allows you to pull up records of any brokers you are considering working with. You can also check with your state securities regulator to see if any actions have been made against a broker.