Investment Identify reputable financial advisers and investment companies. Which investment is reputable? We’ll tell you how you can identify dubious investment offers.
The essentials in brief:
- If you want to invest money, you have many different options. But not all providers are reputable.
- There are a variety of warning signs that can be indicate a dubious investment.
- Our questions will help you to protect yourself from fraudulent providers and show you what to look out for when investing.
How was the first contact made?
Never invest your money with a company or institution that has contacted you by telephone without being asked. No reputable provider of financial services will contact you unsolicited by telephone. This is fundamentally not permitted under competition law. Even if the provider mentions relatives or acquaintances as a reference or they even speak to you yourself to arrange a consultation, this is not yet proof of the seriousness of the investment. Often unsuspecting customers who have already become victims are used to get hold of new investors.
What is the promised return?
Do not be blinded by promised dream returns. As a rule, the higher the return, the higher the risk. For example, the interest in call money accounts is a good orientation. As a rule, returns of ten and more per cent per year can only be achieved with highly speculative forms of investment, in which you must expect a partial or total loss of the investment amount at any time.
Even if relatives or acquaintances have already received the promised interest, this does not necessarily mean that the offer is serious. Often, investors are initially paid the promised high returns in order to win new customers through a kind of speedball system. The profits do not flow from income actually generated, but from the investment funds of new customers.
Who is the provider?
A few amateurs and crooks cavort on the free capital market. Therefore ask for meaningful information about the previous activities of the provider. Glossy brochures and representative offices are often just a mirage. Professional-sounding job titles such as financial intermediary or asset advisor should also be treated with caution.
Where is the provider’s place of business?
Dubious providers prefer to settle in exotic places. Often, however, there is no more than one mailbox at the official company headquarters. If a foreign place of business is given, you should be very careful from the outset – not least because of the problems and costs associated with a possible legal dispute abroad. Most of the time, crooks are not even available abroad.
Are you put under time pressure?
Investment decisions should always be considered calmly. In the case of dubious offers, there is actually only one person who is under time pressure: the provider. He has to squeeze as much money as possible out of a customer in the shortest possible time. Once the customer notices that he is being ripped off, the source of money quickly dries up.
Are you being offered a small business to start with?
The trick is simple: you are offered a minimal amount deal to get you started. This is to test the provider’s performance. This initial business is, of course, always positive.
So: no matter how small, do not let yourself be persuaded into a first deal.
Where is the investment property?
Never forego viewing the property if you want to invest in one. If you wanted to live in it, you wouldn’t buy a house or apartment without viewing it. You should do the same with real estate investments. The absolutely most important quality feature of a property is and remains the location. If a detailed site inspection is not possible, for example, because the property is too far away, you should forego the investment.
Who is the trustee?
The involvement of a trustee alone does not guarantee the seriousness of the offer. The trustee must be a person or institution independent of the provider who has exclusive access to the cash register until the investment is made. However, there are always cases in which the trustee is in cahoots with the dubious provider. Then your money is in great danger.
What does the notary check?
A notarized transaction is required by law for real estate investments and often also for investments in companies. The notary only checks the formal correctness of the transaction. On the other hand, the notary does not have to check whether the investment company is serious, and the offer makes economic sense.
Is the company information disclosed promptly?
Companies are obliged to publish their annual financial statements in good time. This should enable all interested parties to get an idea of the economic situation of a company. However, sometimes the results are submitted late. In the case of investment companies, this can be a sign that the investment is not developing as desired. So look carefully and examine the investment in detail.