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What a shame? But for Scammers, there is no shame and they don’t care about others. They always look out for opportunities to make money by implementing their trick and tactics to lure common people taking advantage of  their fear and need.

Scams History

Scams  go way back in history to 16th and 17th centuries. We only know few scams which happened in the past few decades like Barry Minkow,ZZZZ Best carpet cleaning company become $200 million dollar giant in 1980s. MCI Worlcomm, Enron in 1990’s. Samuel Israel III, the founder of Bayou hedge fund who pleaded guilty running a $400 million fraud at the Bayou Group, Bernie Madoff Ponzi scheme caught for $50 billion fraud, India’s Satyam founder Raju for $80 billion accounting fraud and Allen Stanford CD fraud in recent years. 

Not everyone is smart when it comes to money and sometimes we all do mistakes without knowing it.  So the hedge fund managers and investment advisor take this as an advantage and go on a ride playing their bets. These scams works and penetrates the trust worthy groups like chruch groups, local community groups by word of mouth. One person get into it and finds its reasonably trust worthy for a while. He spreads the word to others in the group and slowly everybody gets in the scheme in no time.

In his article, Greenspan also talks about four important factors on why we keep falling for financial scams. They are Situation, Cognition, Personality and Emotions. You can read more about his analysis at my post in the Jan news section.

What can you do to avoid?

1. If it is too good to be true, it is too good to be true. If somebody promises to sell land in Houston where the temparature will never go up above 70 anytime in summer. That’s what you should suspicious. Similarly if somebody promises in an informercial you can lose weight by just sitting in your couch and doing some jingles. You shouldn’t dump enough to believe it. You should out right know that is not going to work. If you not knowledgeable, try to gather information from internet and other friends who knows better. Don’t go alone.

2. Find the right financial advisor.

There are different kinds of Financial advisors. One who get paid as fees for investment advise, one who gets paid commission for the selling the investment product and last one who gets both.  These days product selling comes first than advice. So find an independent advisor who has knowledge of all products and not just one and only sheds light and advise you to take action instead of selling the product. Choose an advisor who gives importance to giving you advice first and look out for the betterment of your asset.  You can find the certified advisors at cfp.net

3. Not all CD’s are made equal.

I still see in papers that many CD’s(Certificate of Deposit) who promises to return 4-5% when banks can afford to give 2% for 1 year. That is still comparable and achievable thru other instruments but be careful who promises 8-10%. Also try to check on the investment companies whom you are investing and whether its insured or not. Try to ask their FDIC insuranced before you put lot of your money.

4. Avoid Costly Mistakes

Don’t go overboard in putting all your money with one bank or single advisor investment portfolio. Try to distribute it. CDARS is another safe heaven to distrubute your savings in many banks so you don’t end up in one bank if its get  screwed. It is insured as per FDIC regulations in each banks.

5. Finally, you are the right person to manage your money.

As I always say, its your money and you are the best person to look after it. You worked hard enough to earn every dollar and you know the worth of each dollar. It is good get some valuable advice but you are the single most credible person to manage your money and grow for your bright future.

I hope you learned some good learns out of this bad scammer episode. Every walk of our life has some thing to teach us. Watch closely and learn to be wise.  Please do share your thoughts and comments.