Although you won’t encounter lions and tigers in the world of online investing you should probably proceed with as much caution as you would if you were walking alone in the Serengeti. Without a doubt, the Internet has opened a new world of opportunity to individual investors, but there is also a dangerous side that is filled with hackers, thieves and fraudsters. You are the prey and they are hunting daily for the most vulnerable and naïve. That’s why it is critical to know how to safely move through the jungle and avoid where danger most likely resides, as well as how to take proactive measures to ensure your safety in case you unknowingly trend into dangerous territory.
Following a few simple tips can make all the difference. Let’s start with the basics. Although your online account with major brokerage firms is most likely very secure, there are still ways you can put yourself at risk. The following tips can help to keep you safe:
Have the latest virus and security software on your computer. Some security software like Norton’s charges a minimal fee each year but is certainly worth the added protection as you engage in financial activities online.
Don’t access your account or use your passwords on any other computer than your own (i.e. internet café, library or airport, etc.). Once it is in the computer’s hard drive, it is always in there for some hacker to find. Using unsecured Wi-Fi, where no password is required, in public places allow hackers easy access to your computer. Anyone else sitting in that location can pick up on the signals of your computer, capture your data, and before you know it, they have your passwords, your identity and anything else on your computer.
If your home Wi-Fi is not secured and left open, all the hacker needs to do is sit in a car on your street with his laptop and access your data. Make your Wi-Fi password protected with a complex login.
Always keep your firewall enabled.
When typing in URL addresses, use HTTPS instead of HTTP. The “S” means secured and encrypts your data if you send any personal information to that website.
Make it a point to change your password on a regular basis. You should at least change it every few months. .Avoid making it something that is used on any other type of account or something that someone could easily guess based on information you post on social media. This is becoming a common way for these predators to learn what they need to know about you.
Actually use the “logout” button when leaving the site. Don’t just move on to another site without logging out officially.
Always make sure your online broker sends you confirmations of all transactions so if someone accesses your account, you will receive a notification, which will give you the ability to quickly contact the broker and hopefully circumvent any losses.
Follow the standard rules when it comes to security and never provide your passwords, account information or any personal information to anyone via email or phone. The financial entities you deal with from brokerage firms to banks already know your account and won’t be asking you for it, but those lions and tigers and bears will.
When you are not on your computer, shut it off. Even at home.
Don’t respond to spam offers and other inquiries…at all.
Don’t respond to email solicitations of any kind.
Don’t engage in an investment you discovered on social media or a chat room. Follow the basic rules of researching the stock, from the fundamentals to technical analysis, and then make an educated decision for yourself.
Any type of investment that is being pushed by someone in a chat room and they are asking for money at any point in the conversation should be immediate grounds to terminate the conversation. Exercise tremendous caution.
The SEC specifically warns against online newsletters that are often run by fraudulent individuals.
The SEC also encourages investors to beware of unsolicited offers of any kind. If it sounds too good to be true with unrealistic returns then it is. Period.
Stay away from any investment offer that pushes for money immediately.
The SEC specifically warns against “pump and dump” schemes. These people are on social media and spread rumors about a stock in order to pump it up so they can dump it for a higher price…after you just bought it on their recommendation. You and countless others. Again, find reliable sources and stick with those. Not everything online is gospel.
Beware of bulletin boards and other sources where someone may hype a stock where they have some level of personal interest that is not revealed to you. Hidden agendas do not benefit you as an investor. Stick with reliable sources!
Remember, it is a jungle out there. You are the prey. Your money is the feast..
Of course, we can’t discuss fraud without providing important information of where you can go to confirm the validity of a security or for redress or assistance if you have been defrauded. The SEC (Securities and Exchange Commission), FINRA (Financial Industry Regulatory Authority) and the NASAA (North American Securities Administrators Association) are available to take your questions and concerns to about a particular investment you feel could be fraudulent.
The SEC has a very good section on investor fraud. It covers all the latest Ponzi and pyramid schemes, high yield investment programs, prime bank investments and many others. In short, there are plenty of ways to lose your money in legitimate investments simply by not understanding what you are doing. Why add to that by becoming a victim of fraud because you didn’t follow basic common sense rules? Learn what not to do as much as what you should do.
As an online investor, you should make sure that you take all of the proper precautions, from computer safety to looking at every investment with skepticism until proven otherwise. Understand the investment. Measure and verify performance. Get third party opinions, evaluations and information and by all means, know whom you are dealing with. If you don’t, Google them! Stick with legitimate investment sources. It is up to you to make sure that everything you put your money into is not only legitimate but a good decision!
What does this mean to you? The internet offers tremendous opportunity to the individual investor with access to more information than ever before. With the proper safeguards in place and a healthy dose of skepticism about any unsolicited investment opportunity, you can move through the jungle in complete safety. If you aren’t careful, you can become the carcass on the jungle floor, sucked dry by predators that swiftly move on to the next prey. It’s all up to you.