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What are the signs of investment fraud?

More often than not, California business men and women make investments based on sound research and trust. However, it is not unheard of for even the savviest of investors to fall for investment fraud. If you fall victim of an investment scam, you stand to lose hundreds of thousands to millions of dollars, which is why it is imperative that you know the signs of fraud so that you can avoid it. 

Business Insider details a few signs that an investment is too good to be true. The first immediate sign of investment fraud is fishy broker tactics. If a broker describes an investment as "the next big thing," if he or she promises that a deal will make you rich or if he or she acts as if he or she has "inside information," it would be in your best interest to back away from the deal before you get in any deeper. Also, be wary of brokers who put a timeline on an investment.

Another sign that an investment opportunity is actually a scam is that it requires you to borrow money to invest. No legitimate broker will encourage a person to invest money he or she does not have.

The inability to cash out on an investment with ease is also another sign that an opportunity is fraudulent. Legitimate investments are liquid and can convert to cash at any time.

If a broker uses overly complex language to describe an investment, beware. Investing should not be complicated, and no matter how financially inexperienced, old or young you may be, you should always be able to understand the terms of a deal.

Finally, if the returns seem exceptionally high, it is probably because they are not real. Business Insider warns against "guaranteed" business opportunities and anyone who promises huge returns in a short period of time.

The information in this post is for purely educational purposes. It should not be construed as legal advice.



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