You know the saying, “If it sounds too good to be true…” Most investment scams aren’t for millions, but small, “harmless” amounts from $25,000 - $50,000. Bad investments – whether fraud or just poor choices – usually occur because people don’t get a second opinion.
Here are a few things to look for when you are approached about an investment opportunity:
- Ask if it is a registered security. If so, ask for a copy of the prospectus to get all of the risk information. If you get a statement, is it issued by a third party or by the office of the person approaching you?
- Ask when you can expect to get your investment back and how. If it is a family member or friend asking you to invest in their business ask to see their business plan. Encourage them to consult with the SBA on their business idea first.
- Only invest in the business what you can afford and are willing to lose.