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What is Investment Protection?

Florence J. Tipton
Florence J. Tipton

In broad terms, investment protection refers to a guarantee against losing an investment from fraud or theft. Investment protection is usually most effective when a person monitors existing investments to guard against losses or potential misuse of investment funds. Limiting the amount of investment ventures is another possible form of investment protection. The insurance against investment fraud or theft is aligned with knowledge in avoiding scams and recognizing potential fraudulent activity on investments.

Monitoring investments might offer insight into the performance of the investment portfolio, and highlight unauthorized activity. Reviewing written reports could reveal possible misuse. An investor may want to inquire about questionable transactions promptly.

Man climbing a rope
Man climbing a rope

Analyzing performance reports may also serve as a benchmark for determining whether the performance of the investment is meeting the investor's goals. With the guidance of a trusted professional, monitoring may expose areas where impending losses exist. The investor could decide to liquidate or hold the investment for a later recovery period.

Performance of investments is usually subject to external forces that might negatively impact the earnings potential of certain investment products. Balanced information about the performance of an investment may empower investors to make reasonable decisions. A forecast of stock performance is typically a guide, but not always a guarantee, of how well the stock will perform in the future.

Having a diverse portfolio is usually considered a good investment practice. This does not automatically mean that every investment is the right one to make. Unsolicited offers might be a scam in disguise. Another way to look at investment protection is to limit the types of investments made on a regular basis. Lower investments may decrease profits, but alternately, an investor could be protected if the value of the investment declines and causes an inevitable loss.

A wealth of knowledge exists in many forms and channels to empower investors against potential investment scams. Staying abreast of the latest information provided by reputable investment firms and regional government agencies may alert an investor before losing money to a scam. Receiving only the positives about an investment product is a potential sign of fraud.

An individual investor may not have the capacity to expose every form of investment fraud. Some regional government authorities have established agencies that also monitor and limit investment practices that may harm individual investors. Regulations are considered another form of investment protection which authorizes these agencies to investigate suspected acts of fraud. The local laws typically provide legal authority to also prosecute violators of the public’s trust who have misused investments.

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