Investor Awareness Tips

According to the Investment Company Institute, there was $9.4 trillion in IRA accounts on March 31, 2019.  Now that’s a lot of money to get your hands onto if you’re a fraudster or scam artist.  Unfortunately, fraudulent schemes happen all too often when investors are looking to purchase assets in their retirement accounts.  However, you can take steps to prevent yourself from being the next victim of a scheme.

How, you may ask?  Conduct your own due diligence on any investment before you actually invest.

When looking to invest in an asset that will be held in your retirement account, there are two ways that you, the investor, should look at due diligence:

  1. Research the opportunity.  Does the investment look good or sound?  Am I going to make a good, but realistic, return on my investment, or are the returns so high that it’s too good to be true?  
  2. Look out for your own interests.  Is there something the company or individual is not telling me that could come back to hurt my investment later on?  Is the company or individual asking me to invest every last cent of my retirement account? Are there any glaring red flags?

If you answered “yes” to any of these questions, then it may be in your best interest to take a step back and think about the investment.  However, if you answered “no,” then proceed with caution, as there are some things you need to be aware of when making this investment.

Here are a few basic things you should ask yourself before you make any investment in your retirement account:

  • Can I lose money with this investment?
  • Is this investment going to serve the long term purpose of my retirement account?
  • How easy will it be for me to liquidate this investment if I need access to cash?
  • How long has the entity that is offering the investment been in existence?
  • Is this a regulated investment?
  • Is this investment in any type of litigation?
  • Is the investment touting guaranteed returns, regardless of market conditions?
  • Is the investment refusing to provide annual valuations?

These are just a few of the many questions you can ask yourself when researching an investment.  A due diligence review should be comprehensive and thorough. Remember, if something doesn’t feel right with the information you’ve researched about the investment, trust your gut and say “no.”  Once you’ve invested, it may be too late.

Midland is not a fiduciary, so we cannot provide any legal or tax advice, or determine whether the investment is right for you.  Midland can only provide information regarding the requirements in order for us to administer the investment. It is up to you to conduct your own due diligence.

Read more on our blog posts on self-directed accounts, investment examples and due diligence here.