Inflation, bear markets, and recessions aren’t the only potential threats from which you need to protect your money and portfolio. More money, more chances you may be the victim of a financial scam—that’s how that saying goes, right?
These days, phishing emails and robotic voice mails asking you to renew your car’s extended warranty are child’s play. Scams are getting bigger and, unfortunately, more believable.
In honor of October being Cybersecurity Awareness Month, here are the financial fraud red flags to look out for and tips to know as you grow your wealth and investments.
Why Do We Fall for Financial Fraud Scams?
What makes us vulnerable to financial fraud scams? Why do we trust these messages or promises?
Scams often emphasize an impending time limit, urging an individual to act immediately—think messaging like “Click here before this offer expires.” These scams prompt us to depend on what Samantha Lamas, a behavioral researcher at Morningstar, refers to as System 1 Thinking.
“This is the side of our mind that tends to be faster and rely on rules of thumb and habits when making decisions,” Lamas says. “System 2 tends to be more methodical and thoughtful. Although there are plenty of instances where System 1 leads us to the right decisions, it can work against us when it comes to especially tricky scams.”
Creating a sense of urgency is a popular tactic for scams, says Morningstar’s chief information security officer Daniel Mayer. “It’s…
