Avoid These Five Potential Rip-Offs and Safeguard Your Retirement Portfolio
by Bob Carlson, Investment U Research
Given the magnitude of the financial collapse and the impact on retirees' portfolios, these are high times for con artists.
In fact, you've probably noticed the uptick in pitches, heavy with rhetoric about Wall Street crooks, government bailouts, high inflation and currency collapses.
Each follows a predictable pattern. They exploit legitimate fears and a retiree's desire to recoup his losses. And they offer up a compelling yet ultimately disastrous investment opportunity.
No doubt, you've heard the idiom that a fool and his money are easily parted. Well, this month I want to do my best to make sure you don't learn such a reality the hard way... Caveat emptor!
The Five Areas of the Market Most Susceptible to Rip-Offs
To this end, I've identified five areas of the market most susceptible to rip-offs:
- Scam Alert #1: Home Equity
A wide range of fraudulent investments have been tied to home equity. Many pitchmen convince retirees to tap their home equity to invest in private investments such as promissory notes, partnerships, annuities and certificates of deposit at unconventional banks.
Here's the thing - these fraudulent investments are not registered with any government agency and don't provide full disclosure of all the important details.
My advice? Be especially wary of any pitch that encourages you to use home equity to invest. And always insist on investing in registered investments.
- Scam Alert #2: Life Insurance Settlements
It's 100% legitimate for an insurance policy owner to sell the rights to their policy to someone else. It's known as a life insurance settlement and it's a big market that's expected to top $18 billion in the coming decade.
That said, numerous life settlement investments are outright frauds. In other cases, inexperienced organizers are simply paying too much for the policies, resulting in mediocre returns and money locked up for many years.
Ultimately, investing in life settlements should be left to sophisticated investors who know how much to pay for a policy. And who have enough capital to build a diversified portfolio.
Or more simply put, life insurance settlements are unsuitable investments for the overwhelming majority of us.
If you're looking to raise capital with life insurance, my recommendation is to consider selling unneeded life insurance policies to investors, but don't be an investor who buys the policies.
- Scam Alert #3: Precious Metals
The price of gold and other precious metals is rising. As a result, investors are looking for new and profitable ways to buy them. In many cases, investors are simply paying too much for metals and coins. To avoid this, shop around.
It's also imperative that you're aware of scams involving firms that offer to buy bullion and store it for you. Some don't actually buy the bullion!
If you want to buy bullion - but don't want the hassle of storage - go with firms that:
- Have been in business for 10 years or more,
- Have audits conducted regularly by reputable third parties
- Have verifiable references.
Insist on these three criteria, even if you're dealing with a local firm that encourages you to come see the gold being stored. There are multiple reports of fraud where firms show investors stored gold. But it turns out that they only bought enough gold to dupe investors or painted other metals to look like gold.
Of course, you can always avoid any of these potential problems by sticking with The Oxford Club's Pillar One Partner, Asset Strategies International.
- Scam Alert #4: Alternative - "Green" - Energy
Alternative energy - or green energy - is one of today's hottest sectors. Investors want to profit from the boom and there's no shortage of opportunities being offered.
Here's the rub - it's tough for you as an outside investor to tell the scams from the legitimate opportunities. It's especially hard if you don't have a science or engineering background.
Even when you do have the necessary technical background, the company still isn't likely to give you enough access to its proprietary processes to evaluate whether or not it's real.
Keep in mind, even the legitimate investments in alternative energy are risky and must overcome many hurdles before delivering profits to investors.
I suggest you let an experienced, solid, professional firm vet the deals for you. For most of us, that means investing through a mutual fund.
- Scam Alert #5: Currencies
Forecasts of collapses in the euro and the U.S. dollar abound. And they're often followed by strategies for profiting from the collapses. Some of the strategies are good, while others are outright scams.
I don't recommend you invest in any currency strategies yourself since it involves trading futures and options, which is inherently more risky.
Instead, use only an experienced adviser or fund with a proven long-term record. And remember to take a look at the fees. You'll be taking a lot of risk, and after fees the returns might not be high enough to justify it.
More conservative ways to invest in currencies exist. Like buying certificates of deposit, government bonds, or savings accounts denominated in a particular currency. But here, too, scams abound with firms pretending to offer these products and simply stealing investors' money.
If you want to buy such products, I recommend you only invest with established, regulated, audited firms like The Oxford Club's Pillar One Partner, EverBank.