Be wary of cold calls

If your phone rings and it’s someone you don’t know trying to get you to buy something or make an “investment,” you’ve received a cold call. Your best move is generally to hang up, but if you keep listening, heed the following cautions:

• If you’re told that you are among some “lucky few” to get this rare opportunity, be on high alert. Other red flags include “sure thing,” “can’t lose,” “guaranteed,” “is going to triple in value” and “must act now!”

• Any investment that sounds too good to be true probably is. If it were really such an amazing opportunity, no one would need to sell it by phone; those in the know would have already invested in it. Stocks that cold callers try to sell are often those that no one else wants — and there’s usually a reason no one wants them. 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.

• If you’re presented with “inside” tips, be wary, because it’s illegal to pass on, or act on, inside information. Try asking for detailed information to be sent to you in writing; if the caller is unwilling, steer clear.

You can ask any cold caller to put you on their “do not call” list. You can also prevent other people from being conned via cold calls by reporting the ones you’ve received. Take names and notes during the call and report anything shady.

The Securities and Exchange Commission (SEC) offers a great overview of what cold callers should and shouldn’t do, and it lists where you can report offenders: SEC.gov/investor/pubs/coldcall.htm. It’s also smart to get on the National Do Not Call Registry; to do that, go to DoNotCall.gov.

Promises of high returns with low risk are likely to be broken. If you really want to grow wealthier, expect it to take a while. Investing in a low-fee S&P 500 index fund is a fine strategy.