How Investing Can Protect Your Assets From Financial Scams

No one is immune from financial scams - they are everywhere and con artists are very good at what they do. Thankfully, there are ways to protect your assets and decrease the likelihood of experiencing one. 

Making smart investments is the best way to protect your assets. Before we look at how investing does that, let’s look at the three more common types of financial scams so you can avoid them. 

3 Types of Financial Scams

There are many methods people use to scam innocent victims out of money, but these are the three most common ones. 

Identity Theft 

With the proliferation of online shopping and bill paying, identity theft is surging in popularity. All it takes is someone finding your username, password, and personal details (like a birthday) and they are able to make charges to your accounts. 

When someone commits financial identity theft, they might get a loan using your credentials or use an online shopping account to make large purchases. 

Pure Trust Scam

Also known as “asset protection trusts,” these scams falsely promise people that any income earned in these trusts is not subject to gift or estate taxation. These scam artists try to manipulate people and instill fear of death taxes, saying their trust is the best way around them. 

Anything that promises to help shield your assets from creditors or the IRS should not be trusted. There is no such thing as “pure trust.” People that invest in them will often find that they owe years of back taxes on the assets in this trust. 

Ponzi Schemes

If you have heard of Bernie Madoff then you might be familiar with the idea of a Ponzi scheme. With this type of fraud, a person promises high returns if people invest in their company. Then, that person will take the money from new investors and pay it out as “dividends” to the original investors. 

Ultimately, there is usually no real company the people are investing in. The con artist is taking money from new investors to pay previous investors, and keeping a profit from all of it. 

Protect Your Assets by Making Secure Investments 

People are constantly creating new ways to scam people and steal their assets. The good news is that there are ways to protect your assets from scams - with knowledge and safe investments. 

Knowledge Is Power 

Invest your wealth with a trusted and experienced financial lawyer or advisors. That way, you won’t feel the need to believe untrue statements about investments that can eliminate tax liability or help you avoid creditors. 

You will be less likely to fall prey to scams when you arm yourself with knowledge. Before you invest in a company, make sure they are registered with U.S. Securities and Exchange Commission (SEC) or state regulators.

Make Safe Investments

If your assets are invested in legit stocks, bonds, or other secure accounts, you won’t be a target for people who try to manipulate you with get-rich-quick schemes or scams that are too good to be true. 

Only work with trusted financial advisors or lawyers that oversee legal investment strategies. Who you work with and trust with your assets will make a huge difference in how safe your wealth is. 

Protect Your Assets From Scams

Ultimately, the best way to protect your assets from financial scams is to work with people you trust. A trusted and experienced financial advisor will look closely at your portfolio and secure your assets within secure investments. That’s the best way to avoid becoming a victim.