Tuesday, May 19, 2009

Let's discuss scams

Why do people get victimized by scams? Very often, people fall victim to scams simple because they are not really clear on what they want. They tend to have this general idea of earning a little more money than the usual returns when investing.

Here are two basic rules that would teach you IF you should take out money to buy a product or to invest.
  • The personal reason on why you want to invest.
  • Is the company making the offer legitimate and credit worthy? Generally, scams offer very attractive and unbelievably high returns. Most likely, when you encounter an offer like this you would raise your eyebrows and ask "Is this too good to be true?". If this is your impression on a certain offer, then it would probably be 99% correct. IT IS TOO GOOD TO BE TRUE.
But what are the personal reasons I am babbling about?
  1. What is my interest in joining this network?
  2. Will I buy the product because I need it?
  3. Will I buy it because it is only available in this network?
  4. Will I buy it because I am getting a spectacular discount?
  5. Does someone I know need it?
If you answered NO to all of the above or if it is clear that your interest is not to buy but rather to make extra income. Then here is another set of questions.

  1. Will I earn extra income selling the products?
  2. Is the product worth the time and effort I must exert to earn extra income?
  3. Will I have the time and talent to spend for this product?
If you answered NO again, you should definitely walk away and save yourself some time and money.

It is very important to be clear and sure about your personal purpose in putting you money in a certain offer. You definitely should not put out money unless you are clear on what PERSONAL OBJECTIVES OR BENEFITS you stand to make out of the transaction. You have to be very clear about what you can expect to recieve and, more importantly, what you have to personally invest in terms on money, time and talent.

However, if your answers are YES and you want to earn extra income because the offer is very attractive, study the system a little bit further. Pursue the specific objective of finding out whether the offering is, in fact, based on sound business operations, whether or not it is legal and whether, in fact, the compacy and the agent making the offer are duly licensed.

Why be absolutely sure? Well, it is only to protect yourself from becoming a victim of unscrupulous individuals and companies. They set up businesses for the sole purpose of deceiving investors usually with a promise of high returns. Many people have fallen into the trap of investing their hard-earned money in pyramiding schemes disguised as legitimate multi-level networking marketing firms. Here are a couple of questions you need to ask before finally making the judgement call to invest you hard-earned money.

  1. Is the product something that will benefit a person and is legitimately priced?
  2. Is there a transaction? Is there a document or contract outlining details of the transaction that you can understand?
  3. Is there an actual cash outlay? Do you have to pay a certain amount before you can be a party to the transaction?
  4. Is the money being "pooled"? When the money goes into the business, is it kept in the business for the business?
  5. Is a third party managing the pool of money?
  6. Is there a reward or profit?
If you answered all of the above questions as yes, then the product in an investment product or a security. These fall under the jurisdiction of the Securities and Exchange Commission (SEC).

Do not be content with the Articles of Incorporation issued by the SEC, which most investment proponents present proof of their legitimacy. These are just like the birth certificate of a person and is not valid proof.

A legitimate company should also:
  1. Register its investment products with the SEC.
  2. Secure a specific license from the SEC to sell them.
  3. Secure a specific license from the SEC for each of their agents to sell them.
Ask for a copy of their product registration as well as the company's license to sell them to the public. I will be listing down the scams here later on. Hope you continue reading Compound Savings Interest for more articles!


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