After more than two years of investigating online scams, I’ve come to the realization that many people do not understand the difference between investing, gambling and a scam. In this article, I hope to make the difference crystal clear.
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Most Online Investments are Scams.
Most so-called investment opportunities online are indeed scams that will only take your money. When I say most, I mean 99%. The probability of making significant money with magic software, options, forex, commodities, or a Multi-level marketing scheme is near zero. In other words, you don’t have a snowball’s chance in Hell.
There are several companies online promising to make you rich if you first give them money. Typically, they lure you in with a small expense but quickly hit you with ever-increasing fees. These companies are scams and possibly pyramid schemes. To make money with them, you will be forced to recruit others into the scheme.
They may have slick sales videos that are masterpieces of psychological manipulation with lots of smiling people, luxury houses, and expensive cars, but they are still scams. Never expect to make money by paying to join an online organization.
Investing, Gambling, and Scams.
Let’s start with an example of gambling, playing dice, and assume the pair of dice are legitimate. Playing dice is a game of chance. It does not matter how much you know about the game. It takes luck to win. That’s gambling.
A scam is much different than gambling because it doesn’t matter how much you know about the scam or how lucky you are, you won’t win unless the operator lets you. The shell game is a classic example of a scam. It looks like an easy game of skill. All you have to do is pick the shell hiding the pea. You might believe you can beat the operator because people in the crowd are winning.
Beware of Shills.
Unfortunately, these “winners” are part of the setup. They are shills in cahoots with the operator. At the end of the day, the operator pays the shills for helping him trick the innocent. If you play the shell game, the operator will let you win the first time to build your confidence, so you will bet more money, but the shell game is not a game of skill. It’s a scam.
The shells are shaved down in the back, so each time the operator pushes the shell forward, the pea rolls into his fingers. The pea is made of soft material so the operator can easily hide it. The operator can put the pea under any shell or make it disappear completely. You can’t win with the shell game unless the operator lets you win.
The shell game is a scam. Most so-called online investment opportunities are scams too. The operator controls everything, and the people who claim to have made money with the operator’s system are paid to say that. You can’t win unless the operator lets you win and he’ll only let you win to build your confidence so he can scam you out of more money.
The Shell Game.
Contrary to the title of this video, it is NOT gambling. The shell game is a scam. You can’t win unless the operator lets you win.
Know the Game.
The difference between gambling, a scam and investing is knowledge. For example, if you know baseball cards and recognize when a card is underpriced, you can purchase it and later sell it for a profit. You capitalized on your knowledge. That’s investing.
I know a woman who started her investment strategy as a waitress. She studied real estate appraisal at a local tech school. In time, she became a licensed real estate appraiser and a real estate investor. She knew the value of real estate and was confident before going into an investment she would make money. She’s now a multi-millionaire.
Knowledge is key. Know the game.
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Investing is an extension of Good Money Management.
There are a lot of flashy schemes online that present themselves as investments or money makers. However, if you don’t understand the game, you are gambling or getting scammed. Either way, you can’t win.
Investing is an extension of good money management. It’s not sexy, and it’s not exciting. If you want to create wealth, learn to manage your money. Investing is the process of rationally making your money work for you. Getting it right requires caution, patience, and deliberate calculation. And, as we’ve seen, sound investment is based on knowing the value of your investment.
The Rule of the Busted Transmission.
Money management begins with learning to live on a budget and spending less than you earn. Then, it extends to building up a large cash reserve, a minimum of three months’ salary. Six months or a year’s salary held in reserve would be better. Otherwise, the rule of the busted transmission will get you.
The rule of the busted transmission states that if you have somehow managed to save an extra $1,637 the transmission in the car will self-destruct and cost exactly $1,637 to repair. If you don’t have a cash reserve saved, but instead invested it, you may be forced to liquidate your investment, probably at a loss, to pay for the repair.
To prevent the rule of the busted transmission from sabotaging your investment strategy, you must first save a large cash reserve. A large cash reserve will protect your investment so you can sell it when it is most profitable for you.
Buy Low. Sell High.
Investing does not need to be complicated. If you can’t understand an investment, don’t get involved. Confusion is the scammer’s stock and trade.
Like the example of trading baseball cards, the buyer made a profit because he recognized the value of the card. Before he made the trade, he was confident he would win in the transaction.
The most successful stock investing strategy is just as simple and has made billions for Warren Buffet and many others. The single stock investment strategy that has consistently made fortunes is called “Rule #1 Investing.” It’s not sexy, and it’s not thrilling, but it does create wealth consistently. It’s made fortunes for many people. If you learn it and put it into action, it will make fortunes for you too.
You don’t hear much about Rule #1 Investing because brokers or charlatans cannot exploit it. Rule #1 Investing is the concept of “Buy Low.
With Rule #1 Investing, you’re not dependent on luck. You are capitalizing on your knowledge. To learn more about Rule #1 Investing, read Phil Town’s book, “Rule #1.”
Keep It Simple Sweetheart.
As a, less than charming, Army sergeant once told me, “Keep It Simple Sweetheart.”
As you venture into the world of investing, you will be met with a lot of noise, complexity, and confusion. To successfully navigate past these dangers, it is essential that you tune out the noise and take full control of your money. Build your knowledge base from independent sources, not from so-called gurus or brokers. The more people involved in your investment strategy and the more complex it is, the more likely it will fail.
Do not rely solely on the advice of a broker. Brokers are notorious for “pumping and dumping,” the practice of pumping up the value of a junk stock and then dumping it on their clients. Do not rely on popular financial advisors, TV personalities or investment shows. Often their job is to talk up the value of a stock so their backers can dump their junk holdings at a profit.
Learning How to Invest.
You do not need to take expensive investment courses or subscribe to expensive investment newsletters. You can learn all you need to know from two books.
I recommend you start with the book “The Only Investment Guide You Will Ever Need,” by Andrew Tobias. Get the most recent edition. It’s about $10 on Amazon.
“The Only Investment Guide You Will Ever Need” will show you several money management options plus well-established investment strategies.
Also, read “Rule #1,” by Phil Town. You can learn a lot from Phil Town’s YouTube Channel, I recommend you subscribe. Occasionally, Mr. Town hosts a free training webinar. Read his book and you’ll see how to get on his list for free training.
The Most Important Rules of Investing.
In the video below, Phil Town, the author of Rule 1 Investing, explains the four rules you should never break as an investor. Rule 1 Investing is a proven strategy for earning a consistent 15% with minimum risk and is the precise strategy Warren Buffet used to build his billion dollar empire. To learn more, read Rule 1 Investing.
Day Trading vs Long Term Investing.
In this video, Phil Town reveals the truth about day trading and how it compares to long-term value investing.
The Best Investment.
The best investment is to invest in yourself. Not every investment will work out the way you hoped, and divorce or misfortune can devastate your finances in an instant, but your knowledge of money management and investing can never be taken away.
Many wealthy people have lost everything, sometimes more than once, but through their knowledge of money management and investing, they restored their wealth.
If you want to invest successfully, start with “The Only Investment Guide You Will Ever Need.”
Click to DISCOVER a Proven Path to Financial Independence!
If You Don’t Have Money to Invest
If you do not have the money to invest, I recommend you start an online business to leverage the money-making potential of the internet. Consider affiliate marketing. It’s easy and affordable to begin and the rewards can be phenomenal.
The place to start is The Online Entrepreneur Certification Course. The Starter Course is FREE and will show you how to build an online business based on the industry’s best practices.
To learn more about the Online Entrepreneur Certification Course, Click Here.
If you found this article helpful or have an experience investing, please leave a comment below. Thank you.
Yes I can relate because I have been scammed in the past, in fact not too long ago, but thanks be to God I got my money back. I had to fight hard for it but I got my money back. Your website had a lot of examples and information on what a scam is and how to invest etc. I really enjoyed reading your page however there may be a little too much on a page it was kind of hard to follow sometimes because it jumps from one thing to another. But other than that I still enjoyed your website.
Hi, Steven!
I appreciate your comment. It seems getting scammed online is part of the learning process. I’m glad you got your money back. That’s very unusual.
Thanks for stopping by,
Gary
A very nice article. For any investor, new or experienced, it is vitally important to do your due diligence and, as you said, ascertain whether the “investment” is a scam, a gamble or a true investment.
We should not be drawn by the “Glitz and Glory” promised by the charlatans offering “free” or “low entry cost ” courses that up sell you at every turn or you cannot progress.
As for the lack of money, your idea of the internet is great as millions of people are earning good money on line, but here too you should do your due Diligence.
Hi, Bryan!
You are so right. Due diligence is the name of the game and due diligence begins with reading disclaimers and terms of service. The big print giveth and the small print taketh away.
Most scams and overpriced products rely on stirring a prospect’s emotions into a frenzy so they cannot possibly make a reasonable decision. I’ve learned that anytime an offer is selling a dream, run the other way.
Thanks for stopping by,
Gary
Great guide to investing, Gary.
I think most people are scared to start investing because they think they will lose all their money, and they might if they don’t know what they’re doing. As you state in your article, knowledge is key.
Like you said, investing may not be sexy or exciting, but it is a path to achieving true wealth.
Thanks for posting this, and I’ll be sure to check out “The Only Investment Guide You Will Ever Need.”
You can tell by the content you are very knowledgeable about your niche. This is full of wonderful advice for anyone looking to invest time online or anywherre to make an investment no one deserves to be ripped off. I like how you split up paragraphs with large bold titles kept it from going on
Hi, Rani!
Thank you for your kind words. Much of my investment knowledge comes from experience. I was fortunate to have read Andrew Tobias’s book on common sense investing when I was in my early 20s. It has made a world of difference.
In the process of investigating online scams, I realized that people are lost when it comes to investing and how money is made. Sustainable investing and business must exchange value for money. People do make money on derivatives which are side-bets, but that is a very dangerous way to invest unless you’re a very big player.
For the small investor like most of us, the best strategy is to understand the value of an asset that interests you. Know everything about it. I used the example of baseball cards, but real estate works and so does stocks. The trick is to get very familiar with it. I know of two old farmers who are millionaires because of their knowledge of corn and soybeans.
In the Army, where there is always a barracks rat with a scam, I learned to never bet a man at his own game. You might win once if he lets you, but ultimately you will lose more often than win. That is the nature of most investments on the internet.
Thanks for stopping by,
Gary
Your article How to Invest really opens the eyes of readers. What too often happens is tpeople to use money and others to constantly exploit them and deceive them. Your article clearly explains what an investment means, what is gambling and what is a scam.
So let people choose for themselves. However, the need for money and gullibility, and sometimes greed, make them fall for the sweet talks of certain gurus, who do not think twice about taking advantage of them.
Therefore you think twice before giving your money! Cheers
Your article on How to Invest is a very interesting piece and is a step by step guideline on how to invest. Although its a long guideline, its a very interesting read and so it doesn’t get boring. Keep up the good work and thanks for enlightening me on this.
Hi, Emmy!
I appreciate your kind words. There is so much intentionally misleading information online about investing, I felt compelled to write How to Invest. Andrew Tobias’s book has been the foundation of my investing for nearly 40 years and has made all the difference.
Thanks for stopping by,
Gary
Hi,
Great site. It is well laid out, easy to follow, and the content comes from someone with experience. The comparison between investing, gambling and scams incudes definitions and examples of each and is very informative and helpful. The paragraphs and headings are well laid out and make it easy to skim through the info you want.
Hi, RJ!
Thanks for stopping by. I appreciate your feedback.
Gary
Great article! I have thought about researching investments on a few occasions, but didn’t feel I had the extra time. I enjoyed your article and will now be looking into this more. It was very well written and easy to understand.
The video was a great addition. I did the reading of the article first, and was excited to see what additional info was in the video. I was somewhat disappointed it was pretty much the same thing I had just read. I ended the video before finishing it due to this.
Good luck to you, and I look forward to learning more about investing.
Hi, Amy!
I appreciate your comment. The video is a condensed version of the article for those who would rather not read. It’s my attempt at quickly planting valuable nuggets of information into busy brains.
Thanks for stopping by,
Gary
I totally agree with what you wrote. I learned long ago never to take investment advice from the internet and if you don’t know what your doing keep your money in the bank. Don’t you think practically everything we do in life is a gamble? Gambling is a fools game. No one ever came out in front gambling. To me investing is putting your money in a safe place and then getting it back with interest added. I may never get rich but nor will I lose everything to a scam
Hi, Margaret!
Most of the so-called investment information on the internet is designed to make a person so greedy that they make foolish decisions and throw their money away. Even the big name brokers exploit and fool people. Back in the 80s, I held a Series 7 Securities License and interviewed for a job as a broker for Merrill Lynch. The man interviewing me made it abundantly clear they were not about helping people with investments but were instead all about taking people’s money.
Your advice is very wise as the money we keep is far more valuable than the money we make. Each dollar we earn is taxed several different ways, so in the end, it’s not a complete dollar anymore. However, the dollar we keep is a full dollar, plus any interest we can earn. This is why it is essential only invest in well thought out endeavors that you fully understand.
Thanks for stopping by,
Gary
Pretty solid advice on how to invest our hard earned cash. I always wondered if I should start out by subscribing to one of the popular news letters and get my updates and lessons there combined with a veteran’s help.
Now I know that I need to take a whole new approach. I am going to take a look at that book you suggested and start from there. Hopefully in a year or two I can start making some solid investments.
Great article. Thanks
Hi, Crystal Doc!
Most of the easy to find information about investing is really sales material trying to get you to invest your money with a specific company. Usually, these companies have high fees and confusing methods. Even many of the most respected names in finance are self-serving and will help you only after they have first helped themselves.
The first edition of “The Only Investment Guide You Will Ever Need” was published 40 years ago. A very successful man I knew recommended it. I was 21 when I read it. I’m now 60 and can look back on my life and say without a doubt, this little book has made all the difference.
In that first edition, Andrew Tobias revealed how some companies sell their stock directly to stockholders so you don’t need a broker or pay broker fees. I purchased Duke Power stock this way for $25 a share and BP Oil for $3 a share. It’s hard to believe BP ever sold for $3.
I hope you will read the updated edition of the book and apply it what you learn. It’s an amazing book that will dramatically simplify your approach to money management and investing.
All the best,
Gary
I really enjoyed reading about all your knowledge about scams. As the reader you made me feel very confident about how to identify scams. I myself do not know a whole lot about investing, but often would find myself wanting to start investing for my future.You provided some very well thought out facts and great advice for the first timers. Your website was easily accessible and well laid out.
Hi, Paul!
I appreciate your kind words and pleased you found my site easy to navigate.
Thanks for stopping by,
Gary
Great post. You don’t pull any punches when it comes to spelling out the differences between gambling, investing and getting played. As a former member of more MLM programs than I like to admit, I can see that the main ingredient is getting more and more people to sign up feeding the pig at the top.
I really like the part about investing in yourself. One great way to do this is to invest in paying down your debt and save a huge amount of finance charges and fees.
Thanks for the info.
Hi, Warren!
Thanks for reminding us that getting out of debt is a tremendous money saver. I did the rounds with MLM too. It was educational, but it cost me far more than I made. MLM schemes sell the dream of financial independence and I fell for it.
Thanks for stopping by,
Gary
Gary,
What a world of information you provide. I have been caught up with some of the scams and investment opportunities online in the past.
I wish I had come across your site before getting sucked into some of them.
I know there is no “get rich quick” way of making money, it took me some time to realize that.
I do now invest in myself. Since I am semi-retired, my free time now goes to my websites that will eventually, pay off.
Wealthy Affiliate is the only way to go in my book. When people realize what it takes to build a successful and rewarding online business, they will join.
All my best to your success,
Doug
Hi, Doug!
Unless we are very lucky with parents knowledgeable of finance, it seems we must pass through the minefield of money lies and scams. Most people don’t survive.
Fortunately for us, we live in an extraordinary time with the opportunity to enter the world marketplace via the internet. As you mentioned, it’s not get-rich-quick, but it’s pretty darn good. Anyone who can surf the internet and write a blurb on social media can earn a full-time income online. Here’s how to begin.
Thanks for stopping by,
Gary
A long and careful buildup; I must admit you captured my full attention and at one point I thought it was a wa review until I saw the hit about $49 linked to a scam; but no more said on that note; Years ago a friend from a brokerage firm invited me to invest in the stock market, but I got scared and closed the account after a period of time. I know people have made lots of money and some have lost lots of money. what do you think of the principle that you only play what you can afford to lose?The verdict for me is still out. Thanks for sharing.
Great tips and wonderful analogy with the shell game/scam. Knowledge is power and can save a person thousands of dollars. I will have to look up the book you mentioned. I am currently reading Money Mastering the Game by Tony Robbins, 1/4 of the way through and already learning a lot. Thanks again!!
Hi, Elizabeth!
You are so right. Knowledge is power. Unfortunately, many people prefer to skip that step and often pay a horrible price. The book I mention, “The Only Investment Guide You Will Ever Neet,” by Andrew Tobias, has been the foundation of my financial life since 1978 when the first edition was published.
Thanks for stopping by,
Gary
Love the Layout and article Gary, you can be a financial advisor seriously! You didn’t even need a video to get my attention, very good information here. I’ve been budgeting since about 14yrs old before I even had a job and a lot of your article deals with principals I’ve been using since then.
15 yrs later, I still meet people double my age with money management issues in general. I actually JUST recently heard about the 6mos money on reserve technique from taking a free home buying course and I started it about 2 months ago!
I can say a TON more but brevity is brilliance, I’ve bookmarked your site by the way!
Thank you for this investment information!
Hi, Jaron!
As you know, money management and investing are really very simple, but it does require commitment and discipline. Unfortunately, for every message we hear telling us to save, there are a million messages screaming spend, spend, spend.
Thanks for stopping by,
Gary
Wow, yes I couldn’t agree more Gary! GREAT POINT!
My pleasure, any time!