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Peer Pressure Can Lead To Bad Investments

El Centro, California (NAPSI) - While an investment tip from someone you know can be  tempting, you should always research an investment yourself.

That’s the word from experts who say there’s  nothing wrong with getting investment ideas from friends and acquaintances,  but believe you owe it to yourself to investigate any opportunity that  comes your way. Before handing over any money, you need to check out the  investment and the person selling it.

This is a lesson that cost Carolyn and Ray Thompson of Brewer, Maine, $30,000.

Friends told them about a new and exciting green energy opportunity  involving windmills small enough to install on rooftops. Their investment  would get them exclusive territories where the Thompsons could lease  windmills to homeowners and businesses.

Too Good To Be True

It sounded like a good idea to the Thompsons, so they invested $30,000.  They expected to receive shares in the windmill company, three territories  where they could launch their business and three free windmills of their own.  

But after traveling to Las Vegas  for the initial shareholder meeting in 2008, the Thompsons realized they had  been scammed—there were no innovative new windmills. The Thompsons and  about 200 other investors were shown a fullsize  windmill, still being set up in the middle of the Nevada desert.

“When I saw that windmill,” said Carolyn Thompson, “I  couldn’t stop the tears from rolling down my cheeks. It was nothing  like what they were telling us.”

The Basis Of Affinity Fraud

Cons regularly rely on word of mouth to bring in new victims. Or they make  their pitches to groups, knowing that subtle social pressure brings in more  money.

Psychologists call it “social consensus,” and it’s the  foundation of affinity fraud. The thinking goes that if everyone is doing it,  it must be okay. But the problem is that no one looks behind the curtain to  question the person working the levers.

In the Thompsons’ case, they heard about the investment through  friends at church, and didn’t look into the investment or seller  themselves. If they had, they would have found that he had a long history of  alleged scams—and they might have been able to avoid this loss.

“What we really feel bad about,” said Ray Thompson, “is  that we talked to other people and got them into it, too. They lost $10,000  each. My losses are my fault, but when I bring other people into it, I’m  really sorry about that.”

To learn more, visit the FINRA Foundation’s website at www.SaveAndInvest.org/LearnMore.