Index
H. Kent Baker
(American University, USA)
John R. Nofsinger
(University of Alaska Anchorage, USA)
Vesa Puttonen
(Aalto University, Finland)
The Savvy Investor's Guide to Avoiding Pitfalls, Frauds, and Scams
ISBN: 978-1-78973-562-8, eISBN: 978-1-78973-559-8
Publication date: 21 January 2020
This content is currently only available as a PDF
Citation
Baker, H.K., Nofsinger, J.R. and Puttonen, V. (2020), "Index", The Savvy Investor's Guide to Avoiding Pitfalls, Frauds, and Scams (The Savvy Investor's Guide), Emerald Publishing Limited, Leeds, pp. 179-188. https://doi.org/10.1108/978-1-78973-559-820201001
Publisher
:Emerald Publishing Limited
Copyright © 2020 Emerald Publishing Limited
INDEX
Active managers
, 43, 75
Actively managed funds
, 75–76, 82
mutual funds
, 66
Affinity fraud
, 134
George Theodule’s $30 Million
, 134–136
Affordability
, 67
AJ Discala $300 Million pump-and-dump scheme
, 137–139
All-or-nothing option (see Binary options)
Annualized dividend
, 47
Asset allocation
, 11, 30, 108
Average down strategy
, 54–56, 95
Bad funds
, 8–86
Bear market
, 58–59
Behavioral biases
, 93–94
Bias(es)
, 9–10
availability
, 109–110
behavioral
, 93–94
emotional
, 114–115
extrapolation
, 70, 104
familiarity
, 105–106
home
, 105
illusion of control
, 108–109
local
, 105
misattribution
, 114
overconfidence
, 100–103
recency
, 70
representative
, 103–104
self-attribution
, 58
self-control
, 99–100
social
, 111–112
survivorship
, 86
Binary options
, 154
broker
, 154–155
fraud
, 154
investor complaints
, 155–156
Swindled Investors Out of $10 Million
, 156
Bitcoin
, 117
blockchain
, 159
BitConnect $2 Billion Fraud
, 159–163
BitConnect coin (BCC)
, 160
Blackrock
, 67
Blockchain technology
, 159
Bond funds
, 68
Break-even effect
, 96
Broker
, 154–155
Bull market
, 58–60
“Buy low, sell high” strategy
, 53–54, 100
Buy-and-hold strategy
, 46, 49
BuyandHold.com
, 19
Capital gains distributions, paying taxes on
, 78–79
Capital gains tax
, 27
rate
, 50–51
Capital loss
, 48
Certificates of deposit (CDs)
, 7
Chief executive officer (CEO)
, 152
Closed-end funds (CEFs)
, 68–69, 72–73
Closed-end funds
, 87–89
Closet index funds
, 82–83
CodeSmart
, 138
Cognitive dissonance
, 55–56, 110–111
Commodity Futures Trading Commission (CFTC)
, 156
Compound interest
, 24
Cryptocurrency scams
, 157
BitConnect $2 Billion Fraud
, 159–163
cryptography
, 157–158
prevalence
, 158–159
Cryptography
, 157–158
Currency market (see Foreign exchange market (FX))
Cyberspace
, 150
Decision frames
, 106–108
Digital option (see Binary options)
Direct Stock Purchase Plans (DSPs)
, 19
Disposition effect
, 98–99
Disruptive ideas and technologies
, 65
Dividend reinvestment plan (DRP)
, 14
Dollar-cost averaging
, 19
“Dotcom” firms
, 117
Double coverage
, 89
Dow Jones Industrial Average (DJIA)
, 74
Due diligence
, 32–33
Dutch Billionaire and €100 Million prime bank fraud
, 171–173
Emotional biases
, 114–115
Employer-sponsored retirement plan
, 25
Employer-Sponsored Retirement Plan
, 25–26
Equity funds
, 68
Erosion of returns
, 48
Excessive conservatism
, 15
Exchange-traded funds (ETFs)
, 22, 28, 35, 37, 66, 69
actively managed funds
, 75–76
closed-end funds
, 87–89
closet index funds
, 82–83
high expense
, 90
indexing
, 76–78
issues with
, 89–90
past winners
, 69–71
paying taxes on capital gains distributions
, 78–79
pitfalls
, 67
risk level
, 81–82
window dressing
, 80
Exential $200 Million currency market fraud
, 152–153
Expense ratio
, 73
Extrapolation bias
, 70, 104
Ezubao’s $9 Billion Ponzi Scheme
, 128–130
Fake ETFs
, 90
Familiarity bias
, 105–106
Faulty investment analysis
, 51
“Fear of missing out” phenomenon
, 113
Federal Bureau of Investigation (FBI)
, 155
Fidelity Investments
, 67
Financial advisor
, 17
Financial crisis
, 127
Financial experts
, 60–62
in media
, 103
Financial fraudsters
, 122
Financial Industry Regulatory Authority (FINFA)
, 135, 175–176
Financial Times
, 173
5-star funds
, 84–85
Fixed rate investments
, 174
Fixed return option (see Binary options)
FOLIOfn
, 19
Foreign currency trading fraud
, 150
Exential $200 Million currency market fraud
, 152–153
FX
, 150–152
Foreign exchange market (FX)
, 150–152
Foreign investment products
, 125
Forex (see Foreign exchange market (FX))
Fortune magazine
, 66
Fraud
, 149–150
binary options
, 154–157
online platform
, 163–167
precious metal
, 167–170
prime bank
, 170–173
promissory note
, 173–177
Fraudulent online investment practices
, 163
Fraudulent schemes
, 125
Front-end sales load
, 72
Funds
, 67–68
closed-end
, 87–89
closet index
, 82–83
flows
, 70–71
investors
, 75
Funds-of-funds (FOFs)
, 77
FxTrader signals system
, 131
Gambler’s fallacy
, 104
George Theodule’s $30 Million Affinity Fraud
, 134–136
Google-owned video sharing platform
, 162
Great Depression
, 127
Greed
, 53, 114, 147
Gross return
, 26
Halo effect
, 123, 125
Hedge fund
, 77
Herd behavior
, 112
Herding
, 53, 112–113
Heuristic simplification
, 94
High expense
ETFs
, 90
mutual funds
, 73–75
High yield investments fraud (HYIPs)
, 141–142
ZeekRewards HYIP fraud
, 142–144
High-fee funds
, 75
Higher management fees
, 82
Illusion
of control bias
, 108–109
of knowledge
, 102
Index fund
, 29, 73–74, 79
Index investing
, 89
Index mutual fund
, 76
Indexing
, 29, 66, 76–78
Inflation
, 28–29
Informed investors
, 21
Initial coin offerings (ICOs)
, 158
Initial public offerings (IPOs)
, 62, 138
Institutional investors
, 57, 103
Insurance
agents
, 175
companies
, 57
International companies
, 70
Internet
, 163
trading platforms
, 155
Inventor anonymity
, 159
Inverse ETFs
, 90
Investing
, 36–37
avoidance in business, industry, or security
, 21–22
on regular basis
, 18–19
time for
, 17–18
Investing knowledge, lack of
, 6–8
Investing pitfalls (see also Self-inflicted pitfalls; Stock pitfalls)
, 5–6
avoid investing in business, industry, or security
, 21–22
confusing past returns with future expectations
, 20
failing to have enough indexing
, 29
identifying proper investment strategy
, 12–13
ignoring inflation
, 28–29
ignoring taxes, fees, and expenses
, 26–28
improper diversification
, 22–23
investing on regular basis
, 18–19
issues with time horizon
, 13–14
lack of investing knowledge
, 6–8
lack of investing plan
, 10–12
opting out of employer-sponsored retirement plan
, 25–26
postponing opening retirement account
, 24–25
psychological biases
, 9–10
research
, 32–33
reviewing and rebalancing long-term portfolio
, 30–32
risk tolerance
, 15
risk-return tradeoff
, 15–17
time for investing
, 17–18
underestimating abilities
, 8–9
Investment Company Institute
, 73
Investment policy statement (IPS)
, 11
Investment schemes
affinity fraud
, 134–136
HYIPs
, 141–144
investment fraud
, 121–122
microcap fraud
, 139–141
Ponzi scheme
, 123–130
pre-IPO fraud
, 144–146
psychological tricks
, 122–123
pump and dump scheme
, 136–139
Pyramid scheme
, 130–133
Investment strategy
, 12–13
Investments
, 142
fraud
, 121–122
profits
, 132
Investors (see also Unsuspecting investors)
, 38–40, 45
enthusiasm
, 116
funds
, 75
institutional
, 57, 103
knowledgeable
, 124
optimistic
, 115–116
overconfident
, 101–103
pessimistic
, 116
retail
, 5–6, 33
savvy
, 3, 14, 44, 54, 66, 81
Invitation-only investment club
, 131
JSG Capital Investments $10 Million pre-IPO fraud
, 144–146
Large cap companies
, 68, 70
Legitimate promissory notes
, 174
Leveraged ETFs
, 90
Liquidity
, 68
Loser stock position
, 98
Loss aversion
, 95–97
Low-cost index mutual funds
, 35, 66
Low-priced stocks
, 56–58
Management fee
, 73–74
Market
capitalization
, 8
downturns
, 54
sentiment
, 59
timing
, 48–50
value
, 39
Market cap (see Market—capitalization)
Medallic Art Company (MACO)
, 68
Merged fund
, 86–87
Micro cap firms
, 68
Microcap fraud
, 139–140
VGTel $15 million Penny stock fraud
, 140–141
Mid-cap firms
, 68
Misattribution bias
, 114
Miscalibration
, 100–101
Momentum effect
, 45
Money
market accounts
, 7–8
treasure
, 165
Morningstar
, 72
“Morningstar Mirage, The”
, 85–86
Morningstar Risk Rating
, 84
Multi-level marketing programs (MLM programs)
, 130
Municipal bonds
, 27
Mutual funds
, 28, 57, 66
actively managed funds
, 75–76
bad funds
, 85–86
closet index funds
, 82–83
companies
, 67
family
, 86
high expense
, 73–75
indexing
, 76–78
merged fund
, 86–87
past winners
, 69–71
paying mutual fund loads
, 71–72
paying taxes on capital gains distributions
, 78–79
pitfalls
, 67
ratings
, 84–85
risk level
, 81–82
window dressing
, 80
NASDAQ
, 16
National Basketball Association (NBA)
, 175
National Football League (NFL)
, 175
Net asset value (NAV)
, 66
Net return
, 26
New York Stock Exchange
, 16, 57
Nominal returns
, 28–29
Northwest Territorial Mint (NWTM)
, 168
NWTM $25 Million precious metal Ponzi scheme
, 168–170
Oak Ridge Small Cap Growth Fund (ORSCG)
, 79
Online finance development
, 164
Online platform fraud
, 163
China’s online finance sector
, 163–164
P2P lending platforms
, 164–165
Quianbao $11 Billion online platform fraud
, 165–167
“Only-for-you” schemes
, 121
Open-end funds
, 68–69, 71–72, 81
Optimistic investors
, 115–116
Over-the-counter (OTC)
, 137
market
, 139
Over-trading
, 47–48
P/E ratios
, 68
Passively managed mutual funds
, 79
“Pay yourself first” strategy
, 100
Peer-to-peer (P2P)
, 159
lending scheme
, 128
Penny stock fraud
, 139
VGTel $15 million
, 140–141
Penny stocks
, 56–58, 139
Pension funds
, 57
Ponzi scheme
, 123–130, 168–170
Ezubao’s $9 Billion Ponzi Scheme
, 128–130
World’s Largest Ponzi Scheme
, 126–128
Portfolio drift
, 31
Portfolio strategy
, 6
Pre-IPO fraud
, 144
JSG Capital Investments $10 Million pre-IPO fraud
, 144–146
Precious metal frauds
, 167–170
Price-to-earnings ratio (P/E ratio)
, 40
stocks with low
, 40–42
Prime bank fraud
, 170–173
Procter & Gamble
, 116
Professional management
, 67
Promissory note fraud
, 173–175
Success Trade Securities $14 Million
, 175–177
Promissory note fraud
, 173–177
Pump and dump schemes
, 57, 136–137
AJ Discala $300 Million
, 137–139
Pyramid scheme
, 130
MLM programs
, 130–131
WinCapita Pyramid Scheme
, 131–133
Quianbao $11 Billion online platform fraud
, 165–167
Real returns
, 28–29
Record filing
, 165
Redemption fee
, 72
Regret
, 98
aversion
, 98
of commission
, 97–99
of omission
, 97–99
Representativeness heuristic
, 103
Research
, 32–33
Retail investor
, 5–6, 33
Retail Profit Pool
, 143
Retirement account
, 24–25
Return of capital
, 89
Risk
aversion
, 95
level
, 81–82
risk-return tradeoff
, 15–17
tolerance
, 15, 30
Roth Individual Retirement Account (Roth IRA)
, 25
Russell 2000 Growth Index
, 79
S&P 500 Index
, 44, 73–74, 76
Savvy Investor’s Guide to Avoiding Pitfalls, Frauds, and Scams
, 1–4
Savvy investors
, 3, 14, 44, 54, 66, 81
Securities and Exchange Commission (SEC)
, 71, 156, 158, 171
Self-inflicted pitfalls (see also Investing pitfalls; Stock pitfalls)
, 93
availability bias
, 109–110
cognitive dissonance
, 110–111
decision frames
, 106–108
emotional biases
, 114–115
familiarity bias
, 105–106
herding
, 112–113
illusion of control bias
, 108–109
loss aversion
, 95–97
overconfidence bias
, 100–103
regret of commission
, 97–99
regret of omission
, 97–99
representative bias
, 103–104
self-control bias
, 99–100
skewed beliefs and judgments
, 115–118
social bias
, 111–112
Self-serving bias (see Self-attribution bias)
Selling short
, 77
Selling stock
, 50–51, 53
ShareBuilder.com
, 19
Short selling
, 59
Short-term performance
, 46
“Signal clock” software program
, 131
Skewed beliefs and judgments
, 115–118
Small cap companies
, 68, 70
Smart Investment Management Services (SIMS)
, 135
Smart money
, 45–46
Special dividend
, 47
State Street Global Advisors
, 67
Stock index fund
, 37
Stock market
, 39, 41
Stock pickers
, 44
Stock pitfalls (see also Investing pitfalls; Self-inflicted pitfalls)
, 35
averaging down
, 54–56
bull market
, 58–60
“buy low, sell high” strategy
, 53–54
buying low-priced stocks
, 56–58
buying stocks
, 40
chasing performance and yields
, 45–47
financial experts
, 60–62
great company with great stock
, 38
investing and gambling
, 36–37
market timing
, 48–50
over-trading
, 47–48
selling stock
, 50–51
small losses
, 52–53
stock picking
, 42–44
stock’s value
, 39–40
stocks with low price/earnings ratios
, 40–42
Stock prices
, 54
manipulation scheme
, 138
Success Trade Securities $14 Million promissory note fraud
, 175–177
Tax overhang
, 88
Tax-free municipal bonds
, 27
Taxes
, 26–28, 50–51
Ted Seides of Protégé Partners
, 77
Time horizon
, 30
issues with
, 13–14
Tracking systems
, 47
Trading costs money
, 76
Trading software manipulation
, 155
Transaction costs
, 51, 90
Trial-and-error plan
, 10–11
12b-1 fee
, 74
Unrealized capital gains
, 79
Unsuspecting investors
binary options fraud
, 154–157
cryptocurrency scams
, 157–163
foreign currency trading fraud
, 150–153
fraud
, 149–150
online platform fraud
, 163–167
precious metal frauds
, 167–170
prime bank fraud
, 170–173
promissory note fraud
, 173–177
US Securities and Exchange Commission (SEC)
, 123
Vanguard Asset Management
, 67
Vanguard S&P 500 index fund (VFINX)
, 77
Wall Street Journal, The
, 85–86, 159
WinCapita Pyramid Scheme
, 131–133
Winner stock position
, 98
- Prelims
- Introduction to the Savvy Investor’s Guide to Avoiding Pitfalls, Frauds, and Scams
- 1. Common Investing Pitfalls that Can Separate You from Financial Security and Success
- 2. Common Stock Pitfalls that Can Lead to Big Losses
- 3. Mutual Fund And ETF Pitfalls: What the Industry Won’t Tell You
- 4. Self-Inflicted Pitfalls: The Dangers of Psychological Biases
- 5. Investment Schemes Designed to Separate You from Your Money
- 6. Other Frauds and Scams that Lure Unsuspecting Investors
- Index