When someone sees a red flag, they know it means to either stop or use caution as danger lies ahead. The same holds true for investments. Red Flags in dealing with investments should be treated more like the flashing red lights and bells ringing at railroad crossing gates. It not only means danger lies ahead, it means stop cold and don’t go any further. In investments, there are many issues that can be considered a red flag. Whether or not it is just one, several or all of them, you should stop and not invest. If you ignore them, you have a 100% chance of losing your money. So what are the red flags of investments?

Here is a listing of the most serious ones :

  • status-flagA company says that because they are an Internet company the standard rules of being licensed and registered   does not apply to them.
  • status-flag The company is basically anonymous as they use free website hosting, free E-mail services (Yahoo, Google, Hotmail, Gmail, etc.) instead of paying for a secure website or having an E-mail address with the company’s name in the address.
  • status-flag Your contact person only has a first name and is using a free E-mail address, not one using the company name.
  • status-flag The company has no physical address, phone number, or contact information of any kind.
  • status-flag The company is saying the returns are high yield, but there is little or no risk.
  • status-flag They say your principal (amount you give them) investment is “guaranteed,” or they promise a “guaranteed” rate of return.
  • status-flag They say they need to stay below the radar of law enforcement agencies.
  • status-flag They say the investment is special, that has only been available to the rich or wealthy until now.
  • status-flag They say the program is only available to a select few.
  • status-flag They say the program is a private investment and does not require to be licensed or registered.
  • status-flag Failure to provide financial statements, a prospectus, or details of the investment.
  • status-flag Any investment that requires only a small administrative fee, but promises a large return, i.e.: a $30 administrative fee, but will pay you $50,000.
  • status-flag The program is promoted as finally allowing the little guy to obtain the same financial products that until now were only available to the rich or super wealthy.
  • status-flag They claim the program is registered offshore (outside the United States), and therefore is not subject to the SEC Rules and Regulations. If they solicit U.S. Citizens (even if just one) they are subject to the SEC Rules and Regulations. See our Alerts & Hot Topics link Myths of Offshore Corporations for full details.
  • status-flag Any investment program that does not provide clear and detailed explanations of their investment vehicles.
  • status-flag The program is too difficult to explain in layman’s terms.
  • status-flag Promoter’s claiming to be connected to “insiders” of the program.
  • status-flag This is a “chance-of-a-lifetime” opportunity.