While much has been written about how frauds and scams are perpetrated, it does not protect victims or prevent them from becoming complicit. While identifying scams is helpful in recognizing symptoms, it does not address the root issue of victims being victimized.

As the market is filled with frauds, scams, and prey-selling tactics, investing psychology becomes even more crucial. Surprisingly, many of these scams aren’t very sophisticated and yet they find an astonishing number of victims. The most striking fact is that victims of investment fraud or scams don’t seem to gain anything. They become repeat victims. The Advocacy Network allowed me to interview more than 20 victims of the scams of Bernie Madoff and Allen Stanford. These interviews were done to discover the thinking process behind victims’ step-by-step decision making. Surprisingly, these victims were on average three victims. This shows that victims need to be protected from not only the con-man, but from themselves.

We can ensure that every individual is protected from fraud, scams and other predatory sales techniques by shifting our focus away from the con-mans and their behavior to the victim’s behavior. The Advocacy Network has created a series of materials that will help you understand and recognize the psychological triggers used by scammers and fraudsters. It is easy to recognize the language used in frauds and scams. Research continues to show that investors continue to jump into pools with no water, despite all the red flags.

This series of articles will focus on single concepts and points that will help you make better investment decisions. Let’s first look at what is commonly referred to as investment warnings.

• Only buy from financial professionals who are licensed or credentialed. It’s pretty common sense, wouldn’t it? This is because jails are filled with licensed and credentialed financial professionals. Therefore, this is not an effective deterrent. Examine your account statements. This is a common idea, but unfortunately most investors leave their statements piled up on another desk.
• You should only invest in products you’ve carefully chosen. This is often called due diligence. Unfortunately, most investors don’t allow a financial professional to conduct due diligence. Investors simply don’t have the time or the desire to do proper due diligence. Our due diligence service for our members is one of the main benefits of Advocacy Network membership. All investments that members consider will be subject to our full due diligence.
• Examine your account statements. Although it sounds great in theory, many investors allow their statements to stack up around the house.
• Make sure that you only purchase registered investment products. Simple due diligence issues.
• Avoid Spam Emails and Hot Tips. This is a major trap, as scammers via email are responsible for many of the stock-takers’ scams.
• Avoid phone solicitations, meetings, and other social events. You will no longer need to be cautious about anything once you have mastered the psychological triggers.
• Never make a check payable for a salesperson. Duh.

Although this is a valuable piece of advice, it doesn’t do enough to protect you from frauds, scams and other predatory sales tactics. You need to be able to identify the psychological triggers that lead you to poor decision-making. This valuable information will be provided by us

Next, we’ll discuss the concept of overconfidence and how it impacts our decision-making processes.