2021 Top Investment Risks

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The year 2020 will long be remembered for its challenges. Global crises, like the COVID-19 pandemic, can create great investment opportunities, but can also create emotional and stressful situations that are often exploited by fraudsters looking to scam you out of your hard-earned money. As you consider your financial planning for the year ahead, it’s important that you research any investment to ensure it’s right for you and have the information necessary to protect yourself from the common tricks of scam artists.

To inform and help empower you to make the right investment choices and to protect yourself, the Alberta Securities Commission (ASC) released its list of the top investment risks and possible scams to look out for in 2021. This list is based on investor complaints, ongoing investigations and current enforcement trends.

1. Investments related to COVID-19

A common scam is a pump and dump scheme, where fraudsters promote the opportunity to invest in new products or services to (in the case of COVID-19) aid in the battle against the pandemic. In reality, their claims are false and misleading. After they have heavily promoted (“pumped”) the “opportunity” and the stock prices get artificially inflated, the fraudsters “dump” their stock at the high price, leaving investors with nothing once the truth is revealed and the price of the stock falls dramatically. When investing, do your own homework and carefully research the company and the investment. Make sure you are comfortable with the risk associated with the investment you are considering.

2. New and emerging industries

New and emerging trends/industries make it easier for fraudsters to build investment scams and promote them with false information. There is usually limited information surrounding emerging industries and plenty of hype and excitement for their future potential. So while the new industry may be legitimate, be wary of anyone offering you an investment that seems to have vague or confusing details and sounds too good to be true.

3. Great expectations

Be wary of high-risk investment opportunities, especially if they promise high returns resulting from a proposed deal involving a letter of intent. Proposed deals can fall through, so if it’s being promoted as a sure thing, you should be wary. Before you invest, research the company, the deal and the parties involved. Even if it’s not fraudulent, make sure you’re comfortable with the risks associated with the investment.

4. Affinity fraud

Affinity fraud occurs when victims are introduced to scams by someone they know, such as family members, friends or co-workers. Fraudsters often target ethnic communities, religious organizations, social clubs or professional groups. They pretend to be part of the community and take advantage of the trust and relationships that exist within. They often flaunt their success or wealth and use unsuspecting people to promote the scam to others who trust them. Even if you trust the person encouraging you to invest, protect yourself by researching the person and/or company selling the investment, and make sure they are registered to sell it.

5. Non-registered people selling investments

Generally anyone selling investments in Alberta must be registered with the ASC and lack of registration is a key red flag of fraud. Be sure to check the registration of any adviser or organization and be wary of anyone who tells you that registration isn’t required for the products being offered.

6. Fraudulent ads to work from home as a day trader

Ads that claim you can make good money by working from home as a day trader are popping up more frequently. They say no experience is necessary and all you need to do is pay a fee for the training. However, often, the firms offering these services are not legitimate and the goal is to steal the money you paid as a “fee”. It’s important to remember that, to trade securities, you need to be registered. Also, trading stocks or foreign-exchange is inherently high-risk and complicated.

Protect yourself in 2021. Do your research. Keep an eye open for the red flags of fraud and report any suspicious investments to the ASC’s public inquiries office. The free resources on CheckFirst.ca will help you stay informed, and the new Fraudster’s Playbook “Don’t be Fooled by Fraud” outlines steps that scam artist take so you can recognize and avoid them.

How financially fit are you?

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The New Year has arrived and while health and fitness resolutions easily come to mind, have you considered how financially fit you are? Undue stress from your finances can have a negative impact on your health and wellbeing, but there are several actions you can take right now. Check out our tips to help set out your 2021 financial goals on the right foot!

1. Review and refresh.

Blue Monday gets its name for a reason. The holiday cheer has worn off and your first post-holiday credit card statements have arrived. Check what you spent against your budget and make a plan. The New Year is a fresh start and you can take this opportunity to assess your budget, revise your financial goals and create a plan to repay any debt. CheckFirst offers a wide variety of calculators, quizzes and worksheets that can help you evaluate and set your 2021 budget no matter where you’re starting.

2. Don’t let new goals overwhelm you.

If you’re setting out with new investment goals in 2021, don’t let them consume you. It can be easy to get lost in the sea of investment options, unfamiliar language and complex mathematical equations by yourself. If you’re looking for a crash course in investing that’s taught in plain language and easy to digest, consider the wealth of resources, quizzes and videos at CheckFirst.ca so you pick the right investments for you and your financial goals.

3. Find the right fit. 

The root cause of financial stress can often be linked to a lack of information. If you aren’t working with a financial adviser, take some time to consider it. A relationship with the right financial adviser can help make you a more informed investor who is comfortable with their investment decisions. Before you work with anyone new, always be sure to check their registration and ask key questions to make sure they are right for you. With few exceptions, securities industry professionals are required to be registered with the securities regulator in the jurisdiction where they conduct business. Registration helps protect investors because securities regulators will only register firms and individuals if they are properly qualified, helping you to rest easy.

4. Break up with bad relationships.

Another big source of stress can stem from distrust in your investments or financial advisers. This year, once you’ve evaluated your finances and goals, don’t be afraid to end relationships that aren’t working for you. If an investment, financial partner or financial adviser isn’t providing what you need to feel comfortable and successful, don’t be afraid to speak up. Remember, they’re supposed to work for you.

5. Nothing is set in stone.

While goals can help you clearly define where you want to be, the path to get there isn’t cut and dried. Don’t be afraid to pivot on your financial plan, or change direction throughout the course of 2021 as needed. Your finances should be arranged so as to help you achieve your goals. If something is bringing you undue stress, now is the time to change it!

As you embark on your financial journey in 20121 don’t forget to visit CheckFirst.ca for free, unbiased resources. Wherever you are in your investment journey, CheckFirst is your go-to website for financial knowledge and investing wisely.