While trading securities can be both exhilarating and stressful, you may choose the wrong investments if a fraudster recognizes your emotional weaknesses. After all, emotions can run high, especially when trading stocks. That is when investors may make bad investment decisions.
The Hazards Connected with Emotional Investing
Because of emotion, an investor may underestimate the risk of investing in certain securities. During times when interest rates rise or the market sees more ups and downs, an investor may respond by moving his or her funds to less risky securities.
Emotion may also cause an investor to fall prey to an investment scam because of the promise of regular payments coupled with high returns. This may incentivize them to place their money, during volatile times, into fraudulent security – one that does not reflect the volatility or uncertainty of the current market.
Therefore, scammers use this vulnerability to deceive security customers. People who invest emotionally often do so out of worry or anticipation. This anticipation can make them feel elated, especially if they are seeking to make money with few downsides and risks. However, emotional reasoning along these lines leads to bad investment decisions.
To overcome the problems related to the behavior, you need to rationally make stock trades, even during the most anxious trading times. By looking at the market realistically, you can control your investments with minimal difficulties.
So, how is this accomplished?
To make more logical and informed decisions, you need to look for the signs that can spark a poor investment decision. You can also get further assistance by speaking about any concerns with a securities fraud attorney. Both emotion and a lack of investment knowledge can lead to problems with scammers. By talking to an attorney, you can protect your portfolio’s bottom line.
7 Signs that You Have Probably Been Scammed
The following tactics are used by swindlers who organize fraudulent investment schemes. Watch out for these tricks when you invest in a security that is either unregistered or that is not something you’ve previously considered.
- High-Pressure Sales Pitches
You’ve probably heard these pitches: “Get in on the ground floor of an amazing opportunity!” You need to act quickly, or you will miss out on this golden event!” Indeed, it does sound amazing, or too good to be true!
You should never feel like you need to invest your money right away, lest you miss out on a spectacular chance at riches. Every investment carries a certain amount of risk. Therefore, you should be able to take your time and decide. When you feel pressured to spend your money, even in a tough market, run, don’t walk, away from the temptation.
- A Promise of Big Profits
A legitimate investment is not one that offers jumbo profits. While you can make money, you have to strategize your investments so you remain proactive instead of reactive. You can make better investment decisions by learning to dollar-cost average and diversify your holdings, both of which can help you stay on course and tolerate the market’s ups and downs. By remaining on track during a time of volatility, you will experience more investment success.
- Providing a No-Risk Guarantee
If your returns are guaranteed, you are being hoodwinked. No investment program can make this type of promise. All legitimate investments come with a certain amount of risk.
- Not Getting Your Questions Answered
Scammers also avoid answering your inquiries. Usually, they answer a question by making an inquiry themselves. This is done to get a positive response. For example, they might ask, “You want to increase your portfolio, right?” Naturally, who wouldn’t answer “Yes”? Reputable investment advisors encourage you to address concerns and ask specific questions so you make more informed decisions.
- Not Receiving Information Upfront
Not only do fraudsters avoid answering your questions, but they also are not forthcoming in providing disclosures about securities. For example, you should suspect anyone who does not provide an offering circular or prospectus for investment.
- Problems with or Excuses about Registration
The law is clear that securities should be registered with the Securities and Exchange Commission (SEC). If an advisor tells you that the investment is not registered or does not need to be registered, you are being conned. While some investments are exempt from registration, most companies have to provide disclosure and register with the SEC.
Exemptions include private offerings with restrictions on the number of individuals or institutions, offerings of a specific size, intrastate investments, and governmental securities. Talk to a securities fraud lawyer to review registration requirements.
- Offering an Investment with an Insider Tip
Some insiders provide investments that are based on rumors – tips that emotional buyers listen to easily. It is always better to rely on the facts rather than heresy. Check with your broker and request more information about the security.
When to Speak to a Securities Fraud Lawyer
If you have been lied to about a securities investment and were told it would reap you returns you did not realize, you need to contact a securities fraud lawyer about the matter right away. You also need to contact law enforcement and file a report.
Who Else to Contact If You’ve Been Defrauded
Inform Your Bank and the SSA
If you provided the scammer with your bank details and social security number, you need to inform your bank and the Social Security Administration (SSA) immediately. The bank will help you prevent the fraudster from transferring funds. Notifying the SSA will keep the swindler from using your social security number for other fraudulent activities.
Notify the Credit Bureaus
In addition to contacting your bank and the SSA, you need to call each of the three credit bureaus so they can attach a fraud alert to your credit report. Doing so will prevent the scammer from using your financial details to obtain a new line of credit.
In Summation
When you look at the above warning signs, it is easy to conclude that a swindler misleads investors by confusing them or appealing to their emotions or fears. They avoid describing things clearly or in detail, often suggesting that the info is technical or classified.
Many scammers also conduct themselves unprofessionally by neglecting to answer emails or phone calls. If you feel pressured or do not feel like the fact you are not getting direct answers, you need to turn the other way.
Legitimate investment professionals garner trust and work with you to ensure your questions are answered. They give you ample opportunity to make an informed investment decision.
