Investment Scams: How To Avoid Them Using Our Investment Checklist
By Dr. Steve Sjuggerud
Advisory Panelist, Investment U
February 4, 2002: Issue #109
Unless you’ve been hit by a bus, you don’t know the real meaning of the phrase, “Look both ways before crossing the street.”
So, last week, as much as I could without hurting you, I hit you with a bus. But, as my mother would say, “I did it for your own good”
I tried to tip you off in Thursday’s message by saying, “I don’t want to spoil the surprise.” I even went so far as to mention issue # 103: How To Get Started Investing: Checklists, Common Mistakes, and Avoiding the Poorhouse. But it was to no avail, for some
Even my esteemed copy editor, who has been reading this stuff for years, stepped out in front of the bus. He actually called his wife to make an investment in McWhortle before he realized that bus was actually a fictitious investment scam.
The response to my “recommendation” of McWhortle varied from appreciative…
“Wow! Did you put us on to McWhortle just to test us?”
- Chris Y.
to bordering on angry…
“I was shocked to see this message associated with an Oxford Club recommendation. I have always relied on the Oxford Club to present only the highest quality advice.” What’s going on?” – C. Forman
The Truth about McWhortle Enterprises Is… It’s a Made-up Investment Scam
So before I go any further let me clear this up. Yes, I put you onto McWhortle.com just to test you. And no, it’s not a recommendation of mine, or The Oxford Club’s, or anyone associated with us. We don’t make investment recommendations in this E-Letter – we make you better investors.
So please give me the blame if you were at all angered or offended. But also give me some credit if you ultimately learned a very serious lesson about how investors are often lured into investment scams.
One of the most common mistakes made by investors is allowing emotion – or the promise of a big payoff – to get in the way of a sound investment decision. So with that in mind, let’s review the items in the checklist from IU E-Letter #103, dated January 10, and see how we fared when it comes to McWhortle.com:
Common Sense Investment Checklist: Use This To Avoid Investment Scams and Make Sound Judgments
1. HAVE I DONE ENOUGH OF MY OWN RESEARCH TO KNOW ALL I NEED TO ABOUT THIS COMPANY? If you had your credit card out while reading the McWhortle.com site (or if you called your wife, Mr. Editor), I think you know the answer
2. HAVE I VERIFIED THE CLAIMS MADE ABOUT THIS COMPANY? No. The claims, as they often are in investment scams, were generally vague and not verifiable. Here are a few examples:
- “McWhortle Enterprises is an established and well-known manufacturer” Really? According to whom?
- “Fortune 500 companies routinely use McWhortle Defense Systems” Which Fortune 500 companies are they talking about? And how are they using their systems?
- “With major financial backing from a top-tier investment banking firm” What exactly is MAJOR financial backing? And which investment banking firm is providing this backing?
- “The investment is absolutely guaranteed to at least triple your investment” Wow. That sentence alone should raise all sorts of red flags as an investment scam!
3. WHERE DOES THIS STOCK TRADE? IS IT WIDELY TRADED ENOUGH THAT I WILL BE ABLE TO SELL WHEN I NEED TO? AND HAVE I TAKEN THE NECESSARY STEPS TO PREVENT A MAJOR LOSS ON THIS INVESTMENT? No. Not only is it impossible to find out where McWhortle.com trades, this “investment opportunity” is at the pre-IPO stage, which is exceptionally dangerous.
4. AM I SENDING MY MONEY TO PEOPLE I KNOW TO BE REPUTABLE? No.
5. IS THE SOURCE OF THIS RECOMMENDATION TRUSTWORTHY? Well, this one is the only one where you can point a finger
And you can wave that finger at me. You may have read my sound, conservative investment advice for many years now. And I’d like to think my track record and honesty have come through. So if you trust me or The Oxford Club on matters such as this, I understand.
Learning from Investment Scams
But I still don’t fully agree. My headline was “Make 400 times your money” Folks, nobody is going to make you 400 times your money. Nobody is going to make you 100 times your money. And anybody who’s promising you 10 times your money needs to be investigated carefully. Investment scams are notoriously overboard in their hype and promise, and they prey on those who think and react impulsively.
If you excitedly clicked all the way through McWhortle.com like my copy editor, and you got excited only to have it taken away from you, you will never forget McWhortle.com
And that’s good. It was an infinitely valuable lesson that normally costs people many thousands of dollars. Only in your case, it didn’t cost you a nickel.
So bear in mind, when we give you lessons here at Investment U, they’re coming from the real world. They’re coming from experience. And if we suggest to do some of your own homework to verify claims or know who you’re dealing with is reputable, don’t just glaze over.
The real investment scams out there are very, very good. And they’re preying on investors everywhere. In fact, the SEC’s latest crackdown revealed that Internet investment fraud, with thousands of investment scams working every day, is more than a $300 million businessand it’s growing by the minute.
So yes, Chris Y., I put you onto McWhortle to test you. But I was hoping that, based on the trust we’ve built with you, you’d make it all the way through. That you’d get hit by a bus and fall for the scam.
Because, as I said, only once you’ve been hit by a bus do you know the true value of “look both ways.”
Good investing,
Steve
Today’s Investment U Crib Sheet
- How did you fare with our McWhortle Enterprises investment scam test? Go back to McWhortle.com and re-read some of the outrageous claims as well as the “evidence” used to back up their claims. Real scam artists may be using some of these same techniques in their attempts to rip you off.
- Make your own personal checklist – see IU E-Letter #103 – to help investigate any investment opportunity. Be sure you can answer ALL of the items on the list before investing a dime.
- And remember, the purpose of this E-Letter is to help you become a better investor; not to offer specific investment recommendations. For more information about publications where I do make REAL investment recommendations, you can inquire about my services in The Oxford Club.
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