Investors are often tempted by opportunities outside the traditional stocks, bonds and mutual funds. What are the risks? Here are some of the most dangerous alternatives, or the so-called investment traps, that look tempting but are not actually a good idea:
1. ETFs that offer profits, which are more sensitive to changes in market prices of shares. ETF-s are not necessarily dangerous, but those, which offer double or triple return of particular index, do not benefit the long-term investor. These funds can make a good return only on a daily basis; if you keep them longer than a day, you may incur significant losses.
2. Forex schemes – for most investors, this is pure loss, because those who promote currency transactions usually have a huge commission or manage pyramid.
3. Gold and precious metals – do not trust sellers who promise to keep your gold in safe deposit boxes and sell it when it becomes more expensive. In much of these cases, the gold does not exist at all.
4. „Green schemes” – here scammers offer investments in „new technologies.” They often use recently occurred natural disasters and say that the storm (earthquake, hurricane, etc.) has opened somewhere a unique opportunity, available only now.
5. Oil and gas schemes – there is nothing wrong with trading oil and gas, but experts warn that the benefits of a particular scheme may come from large commissions and suspicious fees.
6. Investing in group – it is known that the creators of pyramids like to target a particular social, ethnic, or religious group. Madoff, for example, is Jewish who looked mostly for other Jews. By gathering people from one unified ethnic or other kind of group, in the pyramid we notice a false sense of security among the victims.
7. Commissions and conflict of interests – always search for the benefit of those who offer investment. They often have higher commissions or some other gain from you as a client.
8. Personal offers – surely, there are special, personal offers that are made only for a certain number of people, but they are rare and the chances to get to a fraud are greater.
9. Transaction „under the table” – do not agree if your broker offers you a deal that is not connected to the brokerage house. They are usually illegal.
10. Online offers – just because something is advertised on the Internet does not mean that it is legal. Fraudsters like to use the social networks to promote highly beneficial offshore investments or disseminate information about how a particular stock would rise. These schemes are known as „pump and dump” scams.