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Avoid Being a Fraud Victim

Another key benefit of having an appropriate strategy and reasonable expectations: It can reduce the odds you become a victim of a financial fraud.

Never assume you’re not an attractive mark for a con artist. If you have money, whether 100 bucks or $100 million, that’s feed fuel for a con artist’s game—and they’ll do anything to keep a con running. If you have reasonable expectations, a strategy you’re disciplined enough to remain with and aren’t motivated to chase pie-in-the-sky (but possibly false) returns, it’s very tough for a con artist to swindle you.

As investors, we’re often concerned by the return on our money. But ultimately, if you fall for a scam, your loss can be total. Sometimes, the return of your money is more important than the return on your money. Know the signs of a possible fraud:

1. Your adviser also has custody of the assets—the number one sign to be aware of. In every financial Ponzi I’ve studied through history, this was the core feature they all had in common.

2. Returns are consistently great—almost too good to be true.

3. The investing strategy isn’t understandable, is murky, flashy or “too complicated” for the adviser to explain to you so you easily understand.

4. Your adviser promotes benefits, like exclusivity, that don’t impact results.

5. You didn’t do your own due diligence, but a trusted intermediary did.

Understand what’s reasonable to expect, and you can avoid falling into a con man’s trap.