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Thursday, November 14, 2019

Red Flags of Investment Fraud

This week, I taught my Rutgers students about investment frauds like Pyramid and Ponzi schemes. 

Each year, thousands of consumers lose billions of dollars to fraud. Con artists use chat rooms and social media to post “urgent” messages telling people to buy a particular stock. They also use telephones to take advantage of unsuspecting victims. The movies Boiler Room and The Wolf of Wall Street provide valuable insights into how unscrupulous operators steal victims’ money by peddling worthless or nonexistent securities. 

So how do you know if an investment is fraudulent? Below are five “red flags”:

¨      Future Predictions- Beware of marketers that guarantee an investment’s future return. With the exception of bonds, investment returns are unpredictable and the value of securities rises and falls with market trends.

¨      Quick Cash- Scam artists often promise fast, low-risk payoffs and compare their returns to low rates available on bank accounts or bonds. Their implication is that victims are “suckers” for settling for low returns and that they have a sure path to high returns in a short period of time.

¨      Obscure Origins- Background information about the origin and performance of fraudulent investments is misleading or not provided because marketers do not want consumers to be able to check out their claims.

¨      Immediate Response- Requiring an immediate response and deposit of funds is another hallmark of investment fraud. Urgency is important to swindlers so they get victims’ money fast before victims have time to become suspicious or contact others for advice.

¨      Recovery Attempts- Fraud victims’ names are widely circulated. If you have fallen prey to a previous scam, you could get a call promising to recover money that you have already lost. Of course, this “service” comes at a price. Be suspicious if people call and already know where you have invested before.

Thursday, November 7, 2019

My Take-Aways From the Jump$tart National Educator Conference

Last week, I attended the 2019 Jump$tart National Educator Conference which contained inspirational messages and personal finance updates for personal finance teachers. Below are six of my key take-aways.

¨     Personal Finance is Constantly Changing- Unlike more “evergreen” school subjects, such as English and Math, Personal Finance content must constantly be updated for new tax laws, credit rules, financial products, and other changes. Students also need to learn that the decisions they make today have future consequences.

¨     Students Need to Be Prepared- Schools need to teach students skills to do jobs that don’t currently exist. Artificial Intelligence (AI) has the potential to deliver deeply personalized learning experiences but there are privacy concerns. Classes need to focus less on teaching specific content and more on “big picture thinking.”

¨     Keep Financial Education Simple- Prepare students for the unknown. Teach problem-solving and decision-making and boil down information into a set of core concepts that students can apply anytime, anywhere. Examples include “consult research before making big purchases” and “pay yourself first” to save money.

¨     Invest in Your Human Capital- Investments in human capital, such as courses, degrees, certification programs, and internships can help workers- at all ages- increase their earning potential. Self-commitment tools on computers and cell phones can help people stick to their plans.

¨     Change to Stay Relevant- About 40% of workers today won’t have relevant job skills in the next five years because they aren’t willing to learn new skills and change. Tasks and roles that you perform today may not be important tomorrow. Speed is the currency of change. To remain relevant, you cannot become complacent.

¨     Foster Creativity in Financial Education- A speaker stated “if teachers foster an environment of creativity, students will create.” Real world simulations that allow students to fail and learn from the experience were also recommended as an effective teaching method.

Red Flags of Investment Fraud

This week, I taught my Rutgers students about investment frauds like Pyramid and Ponzi schemes.  Each year, thousands of consumers lose ...