If you dream of becoming financially secure through smart investments, oil and gas is as good a place as any to start. The world's dependence on petroleum products shows no signs of decreasing, and investing in something that's in high demand is usually a safer bet than investing in emerging technology that may or may not become popular. However, there are good investments and bad investments, even in the oil and gas market. Take a look at a few ways that you can avoid being taken in by investment opportunities that are fraudulent or just bad deals.
Ignore Unsolicited Opportunities
There's no shortage of new and experienced investors looking to get involved in a good opportunity. Someone who has a line on a truly great investment doesn't need to send out junk mail or make cold calls – they'll wait for you to find them through a qualified agent or broker.
As a general rule, if you receive completely unsolicited phone calls or mailed investment offers, you can safely ignore them without worrying that you're missing out on the next big thing. If you're really interested in investing in oil or gas, start doing your research and requesting information about investment opportunities that interest you.
Be Wary of Limited Time Offers and Secret Opportunities
In the investment world, there may very well be offers that are on a tight timetable. However, touting an offer as "limited time only" is also a high-pressure sales tactic used to prevent you from researching deeper into the investment that you're considering. If you're new to investing, your best bet is to resist the urge to jump into a limited time offer without fully understanding it. As you become more knowledgeable about gas and oil investments, you may be develop instincts that will help you quickly distinguish a good deal from a bad one. But in the meantime, take your time to learn all the details and consult your own experts before making a decision.
Secret opportunities are a huge red flag. If someone tells you that a particular investment is so top-secret that you can't discuss it with anyone, even your spouse, your financial advisor, or your attorney, pass on it. No investment should be that top-secret. This is a pitch that is used to prevent you from talking to anyone who may talk you out of making the deal. If it were a good deal, this tactic wouldn't be necessary.
Learn How to Research the Company Before Investing
Even if you know the salesperson touting the investment, you need to research the company offering the investment. While this may sound like a basic step, it can be more complicated than you think – and this complexity can lead many people to give up and rely on their knowledge of the salesperson and the strength of the marketing materials. This is a mistake.
The first thing that you need to know to research an oil investment offer is which regulatory agency oversees the oil and gas industry that area. Unfortunately, these regulatory agencies don't have uniform names – the one you're looking for may not be called something obvious, like "Department of Oil and Gas". For example, would you think to look up the Railroad Commission of Texas to find information about oil and gas companies in Texas? You should, because the Railroad Commission is actually the agency that oversees oil and gas companies in Texas.
Make sure that you can find the regulatory agency in your state or the state that the company you're considering is located in, and find out what information they have about the company you want to invest in. You can also contact the secretary of state in the state the company is located in to find out if the corporation is in good standing. And, you can visit the U.S. Securities and Exchange Commission website to view the company's financial statements – a vital piece of information that any potential investor should consider.
Should you become a victim of a gas and oil investment fraud scheme, the securities and exchange commission is also the agency that you would report the fraud to. However, if you're educated about how to avoid bad investments, how to spot high-pressure, shady sales tactics, and how to research companies offering investment opportunities, then you're far more likely to avoid ever needing to report a fraud.
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