by John Theiss

Created on: March 07, 2007   Last Updated: May 21, 2012

Never Be Ripped-off Again - Five Insider Secrets to Spot That Scam

Almost all scams share one or more common characteristics - identify just one of them and you'll avoid being exploited. A few con-artists are cleverer than the rest - but if you also learn the techniques of evaluating business opportunities, you'll eliminate the risk of being fooled by them too. Here are those characteristics:

1. Huge returns for minimal effort, time and/or expertise.

Example: Frequency Programming World (FPW) promised its 8,000 members that they could turn a 140 investment into 600 as many times as they wished - no strings, no catch, no limits'. But: this was a simple pyramid scheme run by a man called Tom Leigh whereby those people who signed up first were paid with the money from others who joined later and so forth; until there weren't enough people joining to maintain payments. The scheme was closed down by the DTI with estimated losses totalling 3m for FPW members.

Fact: Substantial returns are possible from business opportunities - but not for those people without appropriate commitment and/or expertise in the trade or industry.

Guideline: successful people expect to work for their money, rather than let their money work for them which rarely succeeds in practice. Get-rich-quick' schemes enable only con-artists to get rich quick - at your expense.

2. High rates of interest and low risks.

Example: Index trade produced a brochure promoting lucrative and safe deals via traded options. However: complaints against Index trade were upheld by the Advertising Standards Authority after the operator, Shiraz Lakhi, failed to substantiate claims that the advertised profits had been achieved, investors' testimonials were real, and that the scheme was genuinely risk-free.

Truth: The higher the rate of return, the greater the risk to your investment.

Examples: Bank and building society accounts pay up to around six percent interest per annum and are usually considered to be totally safe. At the other extreme, shares offer the greatest potential for making money. You could double your investment, but not without risk - it is equally possible that you could lose most of it.

Bottom line: high rates of return/low risk deals are simply not possible - always remember, high return means high risks for your hard-earned money.

3. Heavily promoted membership of impressive-sounding trade associations that don't exist.

Example: Freedom Club offered members generous discounts on a range of travel

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