Avoid Crooks Even If You Know fundamentals Of Investing

Thursday, December 25, 2014, 6:00 AM | Leave Comment

Even if you understand the fundamentals of investing, there are times that you come under the financial knife of your supposedly trusted but otherwise con men of the financial industry. The Madoff’s and Stanford’s of the industry are on the increase and we must be on our complete guard all the time on beating [avoiding] them in their con games.

Avoid Crooks Even If You Know fundamentals Of Investing

  • What’s the problem?…

    I have a friend who is MBA in finance and accounting. For a little over two years, he has been warning me about the crooks and scums of the financial investing world.

    These scums sit behind their desks in sheep clothes but in reality they are the wolves of the industry.

    Two years ago, my friend lost thousands of dollars to a man because he trusted him completely with his money. My friend never bothered to keep track of his investments.

  • “That don’t mean nothing…”

    Like Madoff and others, this crook of his would send him monthly statements with some numbers. My friend never carefully examined the numbers. It turned out that they were just that – numbers on a piece of paper.

    Anybody can put some numbers on a piece of paper. “That don’t mean nothing.” The numbers can be real numbers from real investments or they can be as bogus as the ones Madoff presented to his investors.

    My friend always knew the man he trusted with money was representing a regulated investment firm. Again “That don’t mean nothing.”

    New York Times reported recently…

    Over three decades, spending on the white-collar police – securities, banking and tax investigators – has not kept pace with the rapidly expanding financial sector, leaving a cost borne by all investors.

    Regulatory agencies now operate under tightened rules that restrict their ability to act, budgets that have shrunk their capacity to investigate, and revisions to regulatory laws that have unraveled parts of the fabric of investor protection.

    Does that mean the crooks, scums and the schmucks are free to roam the financial world and they can freely do whatever to empty the investors’ pockets and fill their own?

    Many folks would say “I know about spending less than you make, diversifying your investments and knowing where you are investing.”

    But just reading about it here on this blog or some place else is not enough. Information is good to have. It becomes knowledge when you truly act upon it.

    It seems you are on your own…

    Without I.R.S. guidance, Mr. Bartnof, a lawyer in Tarzana, Calif., said, different people will end up with different results because of differing advice, and the I.R.S. will waste audit resources to pursue people trying to comply with uncertain tax laws.

    The I.R.S. has not issued any guidance to Madoff investors, said a spokesman, Bruce I. Friedland. He said they should consult their tax advisers.

  • Precautions you can take…

    • Never make checks payable to an adviser. Always make a check out to the clearing firm; that one does the actual trades.

    • Make sure your monthly statements come directly from the investment firm, not from your advisers.

    • Don’t trust statements at face value.

    • Check your statements immediately and closely, just as you should check each item on credit card and checking account statements.

    • Call the firm if an item that looks out of place or that the adviser does not recall. Failure to act swiftly could wipe out any chance of recovery in litigation.

    • Call the firm to inquire about the Web addresses it uses.

    • Number called should be obtained independently, not from the statement itself. An Internet search or a call to directory information should yield the number.

    • Make sure you invest money with a registered investment company or mutual fund.

    • Unless you are dealing with a big-name mutual fund, ask for a statement from the bank that is the custodian of the securities.

In a Nutshell
You must be aware of your investments all the time. Examine your monthly statements closely. Raise questions if you see some numbers out of the ordinary.

Be aware of where you are investing. It’s your money. Don’t just give it to someone no matter how much you trust him/her. Be in control of your own money.

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