Top investment risks in 2021

Photo by Austin Distel


The year 2020 will long be remembered for its challenges. Global crises, like the COVID-19 pandemic, can create great investment opportunities, but can also create emotional and stressful situations that are often exploited by fraudsters looking to scam you out of your hard-earned money.

As you consider your financial planning for the year ahead, it’s important that you research any investment to ensure it’s right for you and have the information necessary to protect yourself from the common tricks of scam artists.

To inform and help empower you to make the right investment choices and to protect yourself, the Alberta Securities Commission (ASC) released its list of the top investment risks and possible scams to look out for in 2021. This list is based on investor complaints, ongoing investigations and current enforcement trends.

Investments related to COVID-19

A common scam is a pump and dump scheme, where fraudsters promote the opportunity to invest in new products or services to (in the case of COVID-19) aid in the battle against the pandemic.

In reality, their claims are false and misleading. After they have heavily promoted (“pumped”) the “opportunity” and the stock prices get artificially inflated, the fraudsters “dump” their stock at the high price, leaving investors with nothing once the truth is revealed and the price of the stock falls dramatically.

When investing, do your own homework and carefully research the company and the investment. Make sure you are comfortable with the risk associated with the investment you are considering. 

New and emerging industries

New and emerging trends/industries make it easier for fraudsters to build investment scams and promote them with false information. There is usually limited information surrounding emerging industries and plenty of hype and excitement for their future potential.

So while the new industry may be legitimate, be wary of anyone offering you an investment that seems to have vague or confusing details and sounds too good to be true.

Great expectations 

Be wary of high-risk investment opportunities, especially if they promise high returns resulting from a proposed deal involving a letter of intent. Proposed deals can fall through, so if it’s being promoted as a sure thing, you should be wary.

Before you invest, research the company, the deal and the parties involved.

Even if it’s not fraudulent, make sure you’re comfortable with the risks associated with the investment.

Affinity fraud

Affinity fraud occurs when victims are introduced to scams by someone they know, such as family members, friends or co-workers. Fraudsters often target ethnic communities, religious organizations, social clubs or professional groups.

They pretend to be part of the community and take advantage of the trust and relationships that exist within. They often flaunt their success or wealth and use unsuspecting people to promote the scam to others who trust them.

Even if you trust the person encouraging you to invest, protect yourself by researching the person and/or company selling the investment, and make sure they are registered to sell it.

Non-registered investments

Generally, anyone selling investments in Alberta must be registered with the ASC and lack of registration is a key red flag of fraud. Be sure to check the registration of any adviser or organization by visiting CheckFirst.ca; and be wary of anyone who tells you that registration isn’t required for the products being offered.

Ads that claim you can make good money by working from home as a day trader are popping up more frequently. They say no experience is necessary and all you need to do is pay a fee for the training.

However, often, the firms offering these services are not legitimate and the goal is to steal the money you paid as a “fee”.

It’s important to remember that, to trade securities, you need to be registered. Also, trading stocks or foreign-exchange is inherently high-risk and complicated.

Fraudulent ads

Protect yourself in 2021. Do your research. Keep an eye open for the red flags of fraud and report any suspicious investments to the ASC’s public inquiries office.

The free resources on CheckFirst.ca will help you stay informed, and the new Fraudster’s Playbook “Don’t be Fooled by Fraud” outlines steps that scam artist take so you can recognize and avoid them.