Quiz: The Ultimate Investment Scams Quiz: HowStuffWorks
The Ultimate Investment Scams Quiz
4 Min Quiz
Image: refer to hsw
About This Quiz
After Bernie Madoff made off with more than $60 billion in fraudulent funds, investment scams received a lot of high-profile attention in the media. There is, however, a wide array of confidence schemes that financial shysters use to defraud starry-eyed investors. Take this quiz to find out if you can tell the difference between a solid investment and a shady risk.
Why are thinly traded stocks often used as tools in investment scams?
Since they feature low trading volume, a small increase in the number of shares purchased can easily raise the stock price. Then the scammers can sell the stock and make a quick profit.
How much money do Americans lose to scams every year?
Scams come in many different sizes and types, but they mainly combine promises of wealth, guarantees of low risk, and an insistence on secrecy.
What is the defining feature of an affinity scam?
People tend to trust those with whom they have something in common. Thus, people running affinity scams focus on hobbyist, religious or ethnic groups.
What product did Charles Ponzi sell in his investment scheme?
In early 20th century Boston, Ponzi scammed investors after finding a theoretical hole in the international postal system. His scam earned him $10 million.
What is the defining feature of a Ponzi scheme?
Named for the famous perpetrator of such a scam, Charles Ponzi, such schemes inevitably fail since they have no source of real profits.
What type of scam promotes investments in elite overseas financial institutions that don't actually exist?
The lure of a prime bank scam is the belief that you can get in on an investment that only rich people could otherwise invest in. The only problem is that these "prime banks" don't actually exist.
Why does the urgency and scarcity concept within a con work?
In addition, the scammer benefits because if people invest on the spot, they will not have a chance to investigate the true value of the investment.
What is a prospectus?
A legitimate investment opportunities should have an official prospectus that clearly spells out the risks and potential reward of the investment.
What type of investment offers deserve extra caution?
If the investment opportunity is overseas, it may not have the same regulatory restrictions, and thus might be riper for manipulation.
Why should you be wary of a quick return on investment?
Often scammers will pay out a small return quickly, to give you more confidence in your investment.
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