It's been a bad time lately for investors and the recent 50 billion securities scam hasn't helped any. Bernard Madoff, a well respected former Nasdaq chairman, admitted to running a Ponzi scheme. Like any pyramid scheme, the first investors saw a huge return on their investment funded not by smart investing but by the next level of investors buying in. Although the list of those ripped off by Madoff include the rich and the famous, there is a very serious downside for the rest of us.
Apart from banks, corporations, and individuals a lot of charities had invested with Madoff. Now many of these charities, scattered all over the country, are closing their doors. A charity providing funding for Jewish nonprofits in Massachusetts had to close its doors leaving local organizations scrambling to save cultural and educational programs. Even charities who did not invest with Madoff are suffering because some of their normal donors did invest and so cannot afford to donate this year. The ripples from these failing charities will be far reaching and the full impact may not be known for quite a while.
Another casualty of the scam is in the area of investor confidence. Many people have pulled out of the stock market and many more are considering it. People who might have become first-time investors are seriously rethinking what to do with their nest egg. In order to avoid a scam there are some things you should consider before investing.
Assume that you will lose the money you are investing. If you can afford to lose it, then go ahead. Investing isn't without risks and just like you wouldn't gamble with your rent money in Vegas, you shouldn't gamble with money you have to have.
Do your homework. Investigate the company or fund you're thinking of investing in. Know how they're doing financially and know what their track record is.
Talk to someone about your taxes. A tax professional can help you determine how either profits or losses from a particular investment will play out in your tax returns.
Get your questions answered. If the person you're dealing with won't explain everything to you in clear, simple terms and answer all your questions, you should seriously consider investing somewhere else.
Investing has always been a gamble. Unfortunately it seems like we're hearing more about losers these days than winners. Still, with some careful planning you can at least feel a little more confident putting your chips on the table.
Related Links:
