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B. Scams and how to spot them

1. Be forewarned.

"I could never get scammed, I'm too smart/cautious/skeptical." These words have been spoken by many an individual who has ended up losing hard earned money to fraudulent investments. What happened? The reasons are as varied as the individuals involved. Often, the perpetrator isn't even a stranger, it's someone known to the victim for a long time. Sometimes the victim is led to the fraud by another victim of the same fraud because fraud is like a virus--it passes easily from one individual to another. In all cases, there were warning signs that went unheeded, steps that could have been taken, but hindsight is 20/20. The best way to protect your investments from fraud is to always be on the lookout. A wise adage goes 'if it sounds too good to be true, it probably is'.

2. Stick to your plan.

We've already mentioned the importance of having a solid financial plan. Sticking to the plan and not deviating for something 'better' in the spur of the moment is one tried and true method of avoiding fraud. Criminals are masterminds at making a bad investment look like the next 'big thing'. However, they often don't have solid evidence to back up their claims. They rely on word of mouth from other victims, dummied up policy papers and prospectuses (or no prospectus at all). If you can't find the information they are quoting in reliable, independent sources beyond the occasional sensationalist headline--walk away.

3. Use your tools.

"I'm from the government and I'm here to help you" is not just a meme.  Companies issuing stock have to be registered with the Securities and Exchange Commission and that information is available on the SEC website. Stocks are listed on major indices like the New York Stock Exchange and NASDAQ. If what you're being sold is something 'too new to be registered' or 'not required to be listed', check with the securities regulator in your state anyway. In Illinois the state securities regulator is the Secretary of State Securities Department and you can speak with an examiner to determine if the investment you are researching is legitimate.

4. Understand the 'pressure points'.

Criminals want one thing--your trust. They will use any weapon available, fear of running out of money, the promise of the good life, any emotional string they can pull to get you to let your guard down. In order for the crime to take place, they have to work fast, before you have a chance to do your homework. If an investment is a wise choice today, it will be just as wise in a week after you've had a chance to do independent research. Always remember: there will be other opportunities down the line. A wise investor knows when to pass up 'the next big thing'.

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