Cold calls can burn

Picture it: You’re minding your own business, when the phone rings and someone you don’t know starts urging you to invest in something. That’s a “cold call,” and it can be dangerous.

You might be informed that you’re among the “lucky few” to be offered a “sure-thing investment.” You might even be guaranteed that your money will “triple within six months!” (Of course, you’ll be required to “Act now!”)

Don’t fall victim to a call like that. Remember that any investment that sounds too good to be true probably is. If it were so lucrative, no one would need to sell it by phone. Promises of high returns with low risk are likely to be broken.

Avoid “inside” tips, because it’s illegal to pass on or act on material that is inside information. Steer clear of anyone unwilling to provide details in writing. Beware of predicted or “guaranteed” profits.

Stocks that cold callers try to sell are often ones that no one else wants, ones that they need to unload. This applies to initial public offerings (IPOs), too. Shares of IPOs that people are excited about tend to be hard to come by, not aggressively pushed over the phone.

You can ask any cold caller to put you on his “do not call” list. You can also prevent other trusting folks from being conned by turning in any hypesters. Take names and notes during the call, and report anything shady to the Securities and Exchange Commission (SEC) at sec.gov/complaint/select.shtml. The SEC offers excellent guidance on cold-caller restrictions at sec.gov/investor/pubs/coldcall.htm -- for example, the caller must give his name and the name and contact information for his employer. It offers instructions for getting on the National Do Not Call Registry, too.

If you’re thinking of investing with a cold caller, think twice or thrice. Check out the regulatory background of the salesperson and/or brokerage by visiting finra.org/brokercheck or calling 800289-9999.

Here’s the simplest solution for when you’re coldcalled: Just hang up.