Buzz Words and Warning Signs

As self-directed IRAs become more popular with investors, we must always be aware that there are fraud promoters lurking in every corner waiting for their next opportunity to pounce on an un-expecting investor. To help you avoid falling victim to fraud, here’s a recent study of SEC Investor Alerts which show some very obvious but worth mentioning ‘buzz’ words every investor should watch out for:

• Guaranteed
• Can’t Miss
• Extremely High Returns
• Safe and Risk Free
• Promised _____% Returns

In the SEC Investor alerts they are primarily discussing using self-directed IRAs to invest in LLCs and Private Placements; however, these warnings are absolutely applicable to real estate transactions, private loans, or any other investment a person would consider making.

Examples:

Note: The information presented in these examples has been taken directly from the September 2011 SEC Investor Alert.

Jerry Smith and Jasen Snelling bilked investors out of more than $4.5 million in a nearly decade-long Ponzi scheme. They told investors they were talented day traders and ‘promised’ up to 20% returns.

James Elton Warr through Warr Investment Group LLC and other entities, defrauded the public through their illegal and deceptive sales of securities in real estate programs, raising at least $970,000 from 30 investors. They claimed investors would receive a ‘guaranteed’ 8% annual return and that the real estate investments were a ‘safe and lucrative’ alternative to more traditional investments such as certificates of deposit and stocks.

Let’s not forget Madoff ($50 billion) and Stanford ($8 billion)!

What’s so Bad about Those Buzz Words?!

There is nothing inherently wrong with those words. The problem is that any knowledgeable self-directed IRA investor knows that there are no guarantees and nothing is safe and risk free.  A responsible investor will share their knowledge of the asset they are selling you including all expenses and income they have received over the period of time they have owned the asset they are trying to sell you.

Awareness

American IRA, LLC is very aware of the risks that investors face with self-directed IRAs. That is why we have created educational tools about many facts everyone needs to know in order to do their ‘due diligence’ on their investments. Awareness is key in keeping your hard earned dollars safe.

Minimizing Risk

The best way to minimize risk is to do your ‘due diligence” on every asset you purchase; always consult with professionals; walk, no, RUN away if they use the ‘buzz’ words, and never enter into an investment that does not meet your goals.

All investments have inherent risks. With proper due diligence and a professional team, risk can be managed but not eliminated-that is our job as investors. If you don’t want to take a risk whatsoever, tongue in cheek I say “Put it in U.S. Bonds or FDIC Insured CDs…though as you all know…Bonds and CDs are offering very low returns”.

Disclaimer

American IRA, LLC does not give investment advice.  They do offer guidance as to the rules and regulations related to their self-directed accounts and the benefits of different account types so that their clients can take that information to their professionals to discuss the ramifications of various decisions on their individual situation.

For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.