Commodity Scam Warnings: How to Protect Yourself and Your Money

July 29, 2008

When it comes to commodities investing there are an unbelievable number of scams out there.

I am not kidding when I say that there are literally hundreds of companies out there just waiting to railroad you through the door, part you from your money, and happily send you straight to the gas chamber.

I know we’ve talked a little bit about how to decide what a good commodity investment might be.

So, I wanted to conclude this series by giving you the information you will need to avoid the evil villains of the investment world, and hopefully, get your financial happily ever after.

The secret to spotting commodity scams:

There is one major test that every single commodity scam will fail:

They will promise to make you a lot of money fast, with little to no risk.

  • Penny stocks to make you rich!
  • The next Berkshire Hathaway!
  • The price of Gold/Wheat/Oil is going to skyrocket, get in on the ground floor!
  • They all boil down to one simple thing: Get rich quick! No risk!

Now, frankly we are all smart enough to realize that there is no such thing as “get rich quick”. You wouldn’t be here reading this blog if you weren’t. However, there are not many things in the investment world that are as risky as commodities. Particularly commodity futures. If someone is telling you there is little to no risk involved, turn around and run the other way as fast as you can!

There are also a few other notable ways to spot a scam.

  1. Long “squeeze” pages – We’ve all seen these. They are single page advertisements on the internet designed to keep you reading and convince you to act against your better judgment. If you land on one of these pages, click away as quickly as possible. Nothing good can come of it.
  2. They are in a hurry to get your money – “Prices will skyrocket in the next few days!” or “Invest now before it’s too late.” Seriously, we’ve probably all bought enough junk off of infomercials that we should know better by now! I still have that stupid Ab belt from the 1990’s. You know the one I mean – the one that delivers low grade electrical shocks and promises a 6-pack. Didn’t work for me! And these basic commodity and futures scams are no different.

    Legitimate companies and investment opportunities don’t need to come and beat your door down to get your money. They are already making enough profit on their own. That brings me to my third and final point.

  3. If they appear to “need” your money in any way, shape or form – Run away. Far away. If they are calling you at home, emailing you, or cyber-stalking you in any way, drop them like a crazy ex-girlfriend and head for the hills!

Always take these steps before you invest your money:

  • Find a legitimate broker, and make sure that you get a risk disclosure document. Your broker is required to give it to you by law. Anyone who tries to tell you it’s “just a formality” is scamming you.
  • Explore your options carefully.
  • Sleep on your options. At least overnight, maybe several nights, before you invest your money.
  • Only invest in funds that have a minimum of 3-5 years of solid performance.

Follow those rules and you are far less likely to wind up on the bad end of a commodities deal. There is so much risk involved in commodities anyway, why choose a risky company to invest with?

For more information on commodity scams you can check out The U.S Commodity Futures Trading Commission web site.

I hope that you have enjoyed this series on commodity investing as much as I have enjoyed writing it for you. If you liked it, you can offer your feedback here for a chance to win $50. Thanks!

The Princess Bride photo is © Twentieth Century-Fox Film Corporation 1987.

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