USAA - Spring 2014 - (Page 21)

investment does not replace doing your own homework, Thompson says. RED FLAGS ABOUND If a person describes an investment with phrases like "incredible gains," "breakout prices," "huge upside; no downside," beware, Thompson says. Those types of promises are hallmarks of extreme risk, he says, and classic red flags. It also should give you pause, he says, when an investment is pitched as something you have to do now or risk losing the opportunity. Or that you should invest because others are. Those are pressure tactics intended to get you to drop your guard, he says. Investors should keep in mind that markets fluctuate. "There are going to be years when you make money, and there are years when you might lose value or lose money," Thompson says. Fraudsters don't just go after folks who have piles of money. At some point, most Americans will become a target of some form of financial fraud, the survey found. More than 80 percent of those surveyed said they had been asked to participate in something they considered fraudulent. That could include anything from a face-to-face con job by a phony broker to an email touting an investment opportunity in a little-known stock. Or an invitation to an "educational" luncheon on some type of investment, or even the claim that the recipient has won some foreign lottery. Who is most vulnerable to these schemes? The survey found that people age 65 and older are more likely to be targeted for fraud and 34 percent more likely to lose money in a scam than those in their 40s. But just being younger isn't enough to ensure safety from scams. A good con artist will be able to make his claims sound believable. But if you understand the basics of investing, such claims won't be a lure. Thompson emphasizes that in any investment there will be risk. A proper, licensed investment advisor will walk you through that risk equation, he says. CHECK FIRST A good way to begin vetting a potential investment is to check out the person selling it. The investment industry is heavily regulated, which enables investors to see whether sales representatives are properly licensed. Ask if the person is registered, FINRA advises. FINRA offers BrokerCheck, a tool that allows anyone to research a broker or brokerage firm. You also can call 800-289-9999. And representatives can be checked using the Securities and Exchange Commission's EDGAR database. Most importantly, don't forget to apply com- mon sense, McAlum says. If something just seems too fantastic to be true, it's probably not on the up and up. "You've got to be vigilant," he says. "Vigilance is the first line of defense." Mitch Lipka is the consumer columnist for The Boston Globe. He writes frequently about scams. BUYER BEWARE! SIX CONSUMER NO-NOS Here is a handful of tips from the Federal Trade Commission about what consumers should not do. 1 Don't send money to people you don't know. If you are buying items online, consider using a payment option that provides protection, like a credit card. 2 3 usaa.com Don't agree to deposit a check and wire money back. Wiring money is like sending cash. Don't reply to messages asking for personal or financial information. See legal information on page 30. 4 5 Don't play a foreign lottery. Remember: If you have to send money to collect a prize, you haven't won anything. Don't donate money to pop-up charities in the aftermath of a disaster. Not only are overnight charities often lacking the infrastructure to get help for areas in need, they may be collecting money for fraudulent purposes. 6 Don't buy health products or treatments without first consulting your doctor. Products from unlicensed pharmacies may be fake, expired or mislabeled. » BONUS TIP There's no sure thing in investing. Report fraud at ftc.gov. SPRING 2014 USAA Magazine 21 http://www.ftc.gov http://www.usaa.com

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USAA - Spring 2014