Smart Investor Checklist


Ask These Questions:

The more you look into the background and motives of a salesperson or someone offering advice, the more likely they are to abandon a scheme if that’s what they’re after.  Legitimate investment adviser and broker reps will be happy to answer all of your questions.  Start with these questions:

  • How do the investments actually work?  Get details:  
    • How are profits made? If you don't know the source of the yield, the source of the yield could be you!  
    • What expenses are paid before profits? How much is management paid?  
    • What fees are there and are they front loaded or back loaded? 
    • How can I monitor the progress of the investment?  
    • Will investors get regular financial reports from the project managers?
  • Who is managing the project that I’m investing in?  How do I contact them?  What are the credentials of the managers?  Have they ever been sued by anyone?
  • How do I get my money back?  Are there any lock ups or obstacles to getting my money back right away if I need it? 
  • If I’m staking a cryptocurrency, who holds the title to the coin?  Do I?  Or does the company? NO wallet, NO coin.
  • Who regulates or licenses this product or service? 
  • How does this product meet my investment objectives? 
  • How risky is this investment?  What are the risks? How could I lose money in this investment? 
  • What written information will I receive about this investment before making a decision? 
  • What license(s) do you hold that authorizes you to sell this product or service?

Protect Your Investments

1. Look beyond the façade. Fraudsters are good at what they do. Successful con artists often appear professional, trustworthy and likeable.  They have the ability to make even the flimsiest investment deal sound as safe and sound as putting money in the bank. Ask questions, push back, dig under the façade before you invest. 

For a securities sales person or investment adviser representative, you can also do research.  Extensive background information on investment salespeople and firms is available from the Central Registration Depository (CRD):  check here.

2. Strangers with strange deals. A kingdom of gold from a prince in a faraway land.  That’s weird.  And unlikely.  It’s surprising how much money has been lost in these kinds of offers.  If a deal seems outlandish, it’s a good idea to walk away.

3. Understand your investments.   It’s an investing axiom that if you can’t understand an investment, don’t invest. You have a right to understand what you’re buying. If a sales person tells you it’s too complicated for you to make sense of it, it’s probably because the investment doesn’t make sense.  Research the investment, figure out the risks to you, and make sure you understand and like the terms.

4. Watch out for salespeople who prey on your fears and FOMO. Con artists know that you worry about things such as paying off student loans, paying rent, saving money to start your own business, or just planning for your future. Fear and FOMO can cloud your good judgment. One of the best ways to counter big emotions and pressure to invest is to pause and take a moment away from the sales pitch to consider the offer.  No legitimate big investment is that urgent that you can’t take the time to think about it.  It’s your money, take the time you need.

5.  If it’s too good to be true, it usually is.   Investments are about risk and reward.  No risk, no reward.  If you are promised a guaranteed profit with no risk and all reward, this is not how investments work. It’s not a thing.  It’s probably a scam and something to avoid.

6.  Consider getting a second opinion – No matter what you think of an investment opportunity, consider getting a second opinion, whether from a trusted, informed friend, financial professional, or even a state agency.  While the Division of Securities cannot give advice on investments, we can verify license and registration to make sure the offeror is following securities compliance requirements.

Report Fraud

If you believe you or someone you know has become the victim of investment fraud, report it! Investment fraud is one of the toughest crimes to fight simply because people don’t come forward. You can contact: