Don't Fall For It

Conclusion:Six Signs of Financial Fraud

There is no real substitute for common sense – except for good luck, which is a substitute for everything.

—Jim Simons

Fraud can happen anywhere at any time because no matter the state of the world, there will always be con artists, hucksters, and charlatans who know how to sell the path to easy riches. And, unfortunately, there will always be people willing to take the other side of that trade. I came across a number of data sources that estimated the amount of money lost to financial fraud each year and the number of people who get scammed out of their money. But the truth is those numbers are always on the low side because there are so many people who get taken advantage of who never report what happened to them because they’re embarrassed. They’re embarrassed because they believed in someone or something that was obviously a scam with the benefit of hindsight, but that they glossed over in the moment.

Because financial fraud is never going away, you must prepare yourself to detect red flags that may arise when listening to an investment pitch. Many warning signs appear clear as day only in hindsight because money often blinds us in the moment from tapping into our common sense. Here are six signs of financial fraud:

1. The Money Manager Has Custody of Your Assets

If you wanted to find a single reason for how Bernie Madoff was able to fool so many people en route to a $65 billion Ponzi scheme, look no further than the fact that ...