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  • Writer's pictureNathalie Edeen

Trick or Treat? Common Investment Scams to Avoid

Updated: Oct 20, 2023

As the spooky season of Halloween approaches, it's essential to remember that not all tricks and treats come in the form of candy. In the world of finance, there are some frightening investment scams that can haunt your financial future. As your trusted financial advisors, we want to shed light on these nefarious schemes so that you and your hard-earned money can stay safe. So, let’s explore some of the most common investment scams and how to avoid falling victim to them.

Ponzi Schemes:

The Ponzi scheme is perhaps one of the most infamous investment scams, and it has been haunting investors for decades. Named after Charles Ponzi, who orchestrated one of the earliest-known Ponzi schemes in the 1920s, these scams promise high returns with little to no risk. Here's how they work:

Investment scam tip on sticky note

The Trick: Scammers promise investors high, consistent returns, often much higher.than what traditional investments offer.

The Treat: In the beginning, early investors may receive returns, encouraging them to invest more and refer others.

The Horror: Ponzi schemes collapse when there are not enough new investments to pay returns to earlier investors. Most participants lose their money.

How to Avoid: Be skeptical of any investment promising consistently high returns with little risk. Do your due diligence, and ensure the investment is registered with the appropriate regulatory authorities.

Pump and Dump:

Pump and dump schemes are like the ghosts of the stock market, lurking in the shadows, waiting to strike unsuspecting investors. This scam targets stocks of small, thinly traded companies in the following way:

The Trick: Fraudsters artificially inflate the price of a stock by spreading false information and exaggerated claims about the company's prospects.

The Treat: As the stock price rises, they sell their shares at a profit, leaving unsuspecting investors with worthless stocks.

The Horror: When the scheme is exposed, the stock price crashes, and investors lose their money.

How to Avoid: Always do thorough research on a company before investing. Be cautious of stocks that are experiencing sudden, unexplained price spikes.

Looking to skip out on other spookily bad advice? Check out John's video here:

Advance Fee Frauds:

These scams are like vampires, preying on your desire for quick riches. Advance fee frauds involve tricking investors into paying upfront fees for a promised investment


Investment scam tip on sticky note

The Trick: Scammers offer exclusive investment opportunities but require an upfront fee for access to these deals.

The Treat: Investors believe they are getting in on a lucrative opportunity.

The Horror: After paying the fee, the scammer disappears, and there is no investment opportunity.

How to Avoid: Never pay upfront fees for investment opportunities. Legitimate investments do not require you to pay fees before you can invest.

Binary Options and Forex Scams:

Binary options and forex trading can be legitimate investment strategies, but they are also fertile ground for scammers. These schemes promise easy money through online trading platforms:

The Trick: Scammers pose as professional traders and promise guaranteed returns

through binary options or forex trading.

The Treat: Investors believe they can profit from these trades.

The Horror: Many investors end up losing their entire investment, as the trades are rigged, and there is often no way to recover the money.

How to Avoid: Be cautious when dealing with online trading platforms. Only trade through reputable and regulated brokers. Avoid anyone promising guaranteed returns.

Real Estate Investment Scams:

Real estate is a popular investment choice, but it can also be a target for scams. Scammers may offer fraudulent real estate investment opportunities:

Investment scam tip on sticky note

The Trick: Fraudsters present properties that don't exist, overstate their value, or promise guaranteed rental income.

The Treat: Investors see an opportunity for real estate profits.

The Horror: Once the money is invested, the scammer disappears, leaving investors with nothing.

How to Avoid: Verify the legitimacy of the property and the investment opportunity. Use licensed real estate agents and conduct thorough due diligence.

While Halloween may be a time for harmless scares and costumes, the investment world is not a place for tricks and scams. Protecting your financial future requires vigilance and awareness. Always remember that if an investment opportunity seems too good to be true, it probably is. Consult with a trusted financial advisor, research thoroughly, and don't hesitate to seek legal advice if you suspect you've encountered an investment scam. By staying informed and cautious, you can enjoy the real treats of investing while avoiding the financial nightmares that scams can bring. Happy Halloween, and may your investments be treats, not tricks!



Registered Representative of, Securities and investment advisory services offered through Hornor, Townsend & Kent, LLC. Registered Investment Adviser. Member FINRA/SIPC. 600 Dresher Road, Horsham PA 19044. 800-873-7637, HTK is a wholly-owned subsidiary of The Penn Mutual Life Insurance Company. HTK does not offer tax or legal advice. Caserta & de Jongh, LLC is unaffiliated with HTK.

For Educational Purposes Only – Not to be relied upon as financial, tax, or legal advice. The information herein has been derived from sources believed to be accurate. Diversification is a strategy designed to help manage investment risk. It does not guarantee a profit or protect against investment loss in declining markets.

All investing involves risk including the possible loss of principal. No strategy assures success or prevents loss. Past performance is not a reliable indicator of future results. Dividends are not guaranteed and can be reduced or cancelled at any time.



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