Bottom Line Secrets Magazine, a Scam?

Posted: October 2nd, 2008 | Author: | Filed under: Investing, Retirement, Reviews | Tags: , , , | 20 Comments »

bottom line secrets magazine a scam premiums mag Bottom Line Secrets Magazine, a Scam?

I recently received a sample issue of the Bottom Line Personal magazine. The tag line states: “Bottom Line makes you Healthier, Wealthier, Wiser… Happier too.”

With headlines touting such things as the “Millionaire’s secret to retiring richer faster”, my scam alarm was ringing loudly.

Secret # 1. How to Make More Money Than 90% of Investors – Even if You’re Lousy at Picking Stocks.

They give some silly example of an investor who lost 80% of his nest egg in the tech bubble bust of 2000. He then turned his remaining $33,000 into $7 million over the next 15 months.

Wow! Sounds great. How’d he do it?

By eliminating his loses, of course. We’d all be millionaires if we never lost money in the stock market, right?

Their example goes on to state that:

If you invest $5,000, and lose 20%, you’re down to $4,000 ($1,000 is 20% of $5,000).

Fair enough.

But for you to recover that loss you need to earn a 25$ return ($1,000 is 25% of $4,000).

OK, I’m with them so far.

The more you lose, the harder it is to get back. Recovery from a 50% loss requires a 100% gain, and recovery from a 75% loss requires a 300% gain.

Then how the hell did the investor profiled in the tech bubble example get back his 80% loss just from avoiding further losses?

The answer is he didn’t, it’s a load of bunk.

But the underlying methodology is sound: limit your losses in the stock market by using stop-loss orders.

Secret # 2. Make Your Grandchild a TAX-FREE Millionaire!

The claim:

“If your teenage child or grandchild is gainfully employed, he can contribute up to $4,000 a year to a Roth IRA. If the child puts $4,000 a year away between the ages of 16 and 21 and the Roth IRA earns 10% per year, the child will have $2,045,042 at the age of 65.”

Sounds great on the surface. But what’s the catch?

Inflation.

After those 49 years piling up in the Roth IRA, that $2,045,042 would be worth only $1,391,185 in today’s dollars, assuming a relatively benign 3% inflation rate. That and it took 49 years to get there, so while the headline makes it seem like it’s getting rich quick, it’s anything but.

Does this make it a scam, or mean it’s not worth doing? No, of course not. It’s the point of an IRA or 401(k) in the first place. It’s also the basis of David Bach’s Automatic Millionaire. Just don’t confuse automatic with instant.

Secret # 3. How to Pay Off Your 30-Year Mortgage in Just 23 Years.

No secret here – it’s called a Biweekly mortgage payment.  The only catch is to make sure your lender doesn’t charge a fee for the program or any pre-payment penalties.

Secret #4. Lower Your Tax Bracket.

The claim:

In one easy step, lower your rate to as low as 15%!

This one is so vague I can’t be sure what the “secret” is they’re selling. It could be creating your own business as some form of tax shelter. Maybe it’s legal, maybe it’s not. There are legal ways of doing this. For example, you could invest in tax-free municipal bonds or max out your pre-tax retirement accounts to lower your taxable income.

Secret #5. How to Boost Your Tax Refund.

The claim:

You can boost your tax refund even if you take the standard deduction!

Yeah, I can over-pay the government every pay period by claiming 0 dependants. Whoopdy-do! No thanks, I’d rather owe the government $10 at the end of the year. Then I know I’m keeping most of my money.

So are these really scams?

I think scam is probably too harsh a word. I haven’t actually seen a full issue, but this “free copy” mailer certainly makes it seem like they are trying to make a buck (or take a few of yours) selling information that’s relatively easy to find on the Internet or through other sources. In short, there’s nothing secret about any of it.

Still, it just looks “scammy.” It feels like something targeting gullible retirees. In fact, looking at reader testimonial page shows 6 people – all over the age of 60.

Bottom line on the Bottom Line Magazine: Read some personal finance magazines or blogs and save your money.

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6 Tips for Spotting an Investment Scam.

Posted: July 9th, 2008 | Author: | Filed under: Investing | Tags: , , | 1 Comment »

6 tips for spotting an investment scam photo 6 Tips for Spotting an Investment Scam.

Investment Fraud.

It can take away in a single day what it took you a lifetime to create and save.

There’s a saying that goes, “There are 2 times when scammers are at their busiest: when times are really good, and when times are really bad.”

I don’t need to tell you that things right now aren’t “really good”. Are they “really bad”? Well, that’s open to some debate but I’d say they’re bad enough that scammers have a large crop of victims to separate from their money. Here’s how not to become one.

That wonderful investment offer might be a scam if…

1) You receive unsolicited calls and emails.
Ask yourself, if this person or company is an honest broker or investment house, why are they calling me out of the blue?

2) They promise extraordinary returns.
If the market average for the past 6 months is 4% and you get an email for a stock that’s “guaranteed to return 1000% in the next 6 months”, it’s likely a scam. If it seems to good to be true, it is.

3) The investment doesn’t actually exist!
This is a common scam apparently. You get a call or email that directs you to a website and ask for a small amount to invest in the next up and coming stock, only the stock doesn’t actually exist! Of course, by the time many people realize that, the crooks are living it up in Nigeria, or wherever it is scammers live these days. The prevention to this one is to “trust but verify.” Make sure it exists!

4) The stock tip is for a microcap or “penny stock”.
A microcap or penny stock doesn’t trade that much and so it is easier to influence the price per share. This is the tool of choice for the “pump and dump” scammers. The pump and dump is where a person buys a couple hundred shares of a low price, seldom traded stock. Then they either call or spam emails to hundreds of unsuspecting (and unsolicited, see #1) people telling them how ABCMicro is going to make obscene profits in the next 4-6 weeks and they’d better get on board before it’s too late. Of course, as people fall for the scam, they bid the price up and it becomes a self fulfilling prophecy. Only the scammer knows it’s an illusion, and dumps his shares before the game is up. This is a big reason to avoid microcap and penny stocks. Or at the very least, avoid the ones that show up in “tips” from people you don’t know.

5) The person contacting you is overly pessimistic.
This scam is related to the pump and dump. It’s commonly referred to as the “short and abort” and it plays on fear. scammers short a stock (bet that it will go down), and then generate panic in shareholders to cause the price to fall. Again, this type of scam is easiest to effect with microcap stocks. Some scammers can be exceedingly cruel and run the price up artificially via the pump and dump, and then short the stock before contacting the people they victimized again to scare them into selling, thus victimizing them a second time.

6) The broker doesn’t exist!
This one sounds a bit too ridiculous, but maybe that’s why it works. It makes use of a couple of psychological factors. For one, most people who consider themselves savvy enough to spot  a scam know to question the investment. They can tell if a stock exists and know enough to spot a 250% return on their money as suspect. But what they fail to question is the premise itself. Namely, the broker. They run all the numbers and check all the details of the investment they are being sold only to discover the investment itself was legit, but the person they “bought” it from doesn’t really exist! It’s kind of a plan of an evil genius, really. If you’re ever in doubt as to the existence of a broker, check him out on  www.NASDR.com or www.SEC.gov,

What you can do.

If you suspect you are being scammed, check www.fraud.org or www.fraudbureau.com to see if what you’ve been told seems familiar to what you find there. You can also file a fraud claim.

Also, get to know the SEC and how investments work.

  • Don’t invest if you don’t understand!

Photo, Online Fraud, © d70focus

Technorati Tags: Investing, Scams, Fraud

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