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How can I spot a bad investment?

With all of the opportunities that Texans, and Americans in general, have to make money, it seems there are just as many ways to lose it. Bad investments, bad management, bad economy and more. When you are a victim of investment fraud, however, it stings even more, and the consequences can be heartbreaking. Here are some tips you can use to sort out scams from legitimate investments. 

According to Forbes, you should beware of any opportunity that comes with pressure to make a fast decision. Swindlers know that, when you have time to study an investment from different angles, you are less likely to commit funds to a risky investment. That’s why they push you so hard to make a decision “before the chance is gone.”

Ponzi schemes are a favorite scam that works because they typically involve people you know. Early investors receive a high short-term return on their investment, then naturally want to spread the word to family and friends to invest. They are being used as unwitting accomplices to sell the investment to a wider group. Original investors are paid with money from later investors, and so on, with no real investment being made. Red flags are when you are “guaranteed” high returns and exclusive offers to you and a few others. A legitimate investment is likely to be snapped up by Wall Street without you ever hearing about it. The investment field is hugely competitive and filled with analysts and investors looking for decent returns, let alone high-return investments.

A “get-rich-quick” scam appeals to investors along the same lines, with a return that promises to be exceptional. It appeals to people on many levels because it seems easy and promises to solve your financial woes for good. However, U.S. equity investors report that a seven percent annual return over a period of 10 to 15 years is about average.

Knowing what to look for is the first step in avoiding scams to part you from your money. A legitimate opportunity will still be there after you've done your due diligence.

If you have funds in a retirement account, your fund manager should be able to spot scams and bad investments on more sophisticated levels. Acting as your agent, the manager is responsible to you for losses. If you feel that you are a victim of bad investments, you may wish to consult an attorney with experience in investment fraud to represent your best interests.

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The Law Office of Jessica Taylor, PLLC

The Law Office of Jessica Taylor, PLLC
14100 San Pedro Avenue
Suite 602
San Antonio, TX 78232

Phone: 210-265-6759
Phone: (210) 402-4022
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