What would you do if someone came up to you and told you they had a great investment opportunity with quick returns? While only you can know yourself well enough to answer that question, what we can do is give you advice – run.
There are two key ingredients in everyday financial fraud. And no, we are not talking about the kind of financial fraud committed by high rolling bankers, corporate executives, or government officials. We are talking about the kind of scams faced by the everyday, working-man, investor. The first element in these scams is the desire to get rich quickly. The second is the desire to trust.
These two desires are basic. After all, who wouldn’t want to get rich and who wouldn’t want to believe that humans look out for each other? Wealth and trust are both evolutionarily wired into our brains. Yet both of these things can lead to complete financial ruin.
Essentially, the scammer in question scopes people and finds the easy ones to prey on. Usually, these scammers are fully aware of what they are doing and are doing it with malicious intent. If they are wiley, they choose weaker targets with liquid cash and very little understanding of how finance works. They get these people to trust them by promising big returns. Greed and blind trust are a bad combination, and the victims of these scams fall prey to the scammers that target their ‘get rich quick’ mentalities.
After all, the idea of getting rich overnight is wildly attractive and has been played out in entertainment media ad nauseum, from winning the lottery to a mysterious distant uncle leaving you a vast estate. At times this urge of instant gratification can be so overwhelming that people impair their ability of thinking straight and logically. Thus, end up being scammed.
While we’re all out there on our own, what we can give you is a list of common scams that someone might try on you, and some general rules on how to identify scammers and people that are lying to you. (Spoiler: If it sounds too good to be true, it probably isn’t true).