Afraid of the risk of the stock market but unhappy with the near-zero rates offered by your bank? Well, I have good news for you: I can get you 7.5 percent returns guaranteed with no stock market risk, no commissions and no surrender fees. The minimum investment is $100,000 and this is limited availability – you must send your money right away to take advantage of this limited offer!

Or maybe you’re not afraid of the stock market. In fact, you might be amazed at how low so many stock prices are these days. We agree! In fact, we’ve identified five stocks that are poised for a major breakout, and they are certain to triple in value! Call us today to invest – but hurry! Don’t miss these fast and easy profits!

Both of these investment opportunities sound great, don’t they? There’s only one problem: They are both fake. I made them up – to make a point.

By playing to your emotions, it’s easy for you to abandon logic and common sense. How could anyone legitimately offer a 7.5 percent guaranteed return when the Fed has set interest rates near zero? Makes no sense.

No one is able to predict what will happen next in the stock market – and if they did somehow now, why would they bother to tell you? They’d be busy investing in the stocks themselves! It’s illogical to think they’d contact a total stranger.

And yet, millions of people fall victim to pitches like these every day. Often, your guard is down because the idea is brought to you by someone you know – a friend or family member, perhaps someone in your congregation. I’m not suggesting that the people you know are crooks; I’m saying they were scammed, too, but don’t know it yet! So, they are well-meaning – but just as harmful as the crooks themselves.

It’s called affinity fraud, and the Securities and Exchange Commission has shut down many of these scams in recent months, including:

  • A promoter sold fake promissory notes to African Americans, promising annual interest rates of 12-20 percent, claiming the funds would support Black-owned businesses.
  • Con artists raised $6 million from 80 evangelical Christian investors through fraudulent, unregistered offerings of stock issued by their company, advertised as a worldwide video services provider.
  • A fraudster in South Florida raised nearly $11 million from members of the LGBTQ community, claiming returns as high as 26 percent. His investors typically came to him through word-of-mouth referrals among friends and relatives.
  • A San Antonio businessman tricked first responders, some of whom are retired, into investing $14 million by promising to invest their money into aircraft engines that would be leased to major airlines. After the SEC issued a subpoena, the perpetrator used the letterhead as “proof” to investors that he was working with the SEC to take his company public.
  • A former Georgia state legislator defrauded 100 investors, stealing $23 million by selling promissory notes in his now-bankrupt energy development company. The investors were primarily Indian American professionals who were enticed by promises of earning guaranteed high rates of return.

Covid-19 is posing enough challenges to your personal finances. Don’t add fraud victim to the list. If you encounter an investment idea that seems appealing, even from someone you know, please contact your Edelman Financial Engines (or your) planner before investing.

Source:  Edelman Financial Engines August newletter.

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