The following is a guest post from John, with an article discussing some of the risks we face as investors today online. As the old saying goes, “if it’s too good to be true, it probably is!”

The Internet has grown from being an ocean of information into an easy channel for people to make some cash on the side through any of its numerous moneymaking schemes.

However, while some of these methods offer legitimate means of making extra cash or even earning a living, many of them are just scams preying on the minds of the naive.

Many people have staked their hard-earned money in these scams and instead of getting riches they have reaped nothing but anguish and financial ruin. Here are some of the commonest ways people lose money over the Internet.

• Binary Options

Binary option trading is one of the easiest and fastest ways of losing your money from online trading. Some binary options contracts can last for as little as 30 seconds, which means that you can lose copious amounts of money within minutes.

There are reasons why binary options trading will result in loss of your money. Firstly, the brokers set the odds for each binary options trade in their favor to ensure that they stand to gain over the long run even if you make a profit once in a while.

Additionally, some brokers are unregulated, and therefore introduce unfair rules that further hurt your chances of making any money. This is why many people lose money in binary options.

Further reading:

http://www.optionsadvice.com/regulation/

• Ponzi/Pyramid Schemes

Ponzi, or pyramid scams come in many forms. In fact, some are so well disguised that you have to dig deeper into how they offer to make you money to unveil their true nature. It could be something as innocent and as legitimate-looking as an invitation to make huge amounts of cash doing simple tasks sitting on your couch right at home.

Whatever, the case, you will end up losing money paying for a “money-making system” and paying subscription fees. Of course, there is usually a very strong incentive to recruit more of your friends into these schemes with the promise that you will get a percentage of their earnings in addition to what you would make from your own efforts.

In the end, many people get burned and lose unimaginable amounts of money to these ruthless schemes.

Further reading:

http://money.howstuffworks.com/ponzi-scheme.htm

http://en.wikipedia.org/wiki/Ponzi_scheme

• Forex Trading Scams

Many Forex brokers are legitimate financial companies that play by the rules, and even enable their clients make some money out of the most liquid market in the world.

But only about 5% of the Forex traders make any money, and only 2% can actually make a living off Forex trading. As if the inherent odds of losing money from Forex trading are not enough, some brokers will go a step further in an effort to part their unsuspecting clients from their hard-earned cash.

For instance, the unregulated brokers do not have to work within the rules, which are put in place to protect the client from fraudulence. You should conduct enough due diligence beforehand to ensure that a Forex broker is regulated and has a history of keeping its promises.

Some Forex scammers will just close the user’s account, prevent them from withdrawing their profits, and use confounding regulations that in the end result in people losing their money.

If you are going to trade Forex, be sure you take the time to learn, and maybe even play around with pretend money before doing so.

Further reading:

http://forexmagnates.com/fca-warns-of-clone-forex-website-unregulated-fx-firm-and-two-traders-in-rigging-case/

How to learn to trade Forex for beginners

• Health Affiliate Marketing Schemes

Health affiliate marketing schemes, or most marketing schemes for that matter, have been nothing but nightmares for many people. Affiliate marketing schemes have the makings of a pyramid scheme in that the programs are tiered, meaning that older members of the program can earn off the affiliates they add to the program.

While there can be some sense to this structure based on the fact that you can earn a percentage of the sales your affiliates make, an outright scam will promise you a percentage of earnings regardless of whether the people you bring into the program make any sales or not.

Further reading:

http://www.theguardian.com/money/2011/may/21/affiliate-marketing-lucrative

• Pump and Dump Scams

In this case, a scammer will round up popular names in the investment world and use them to advocate the buying of a certain financial asset, in most cases a stock. The scammer will even go a step further to use credible suppliers of financial information services to promote an investment idea that can appeal to most undiscerning investors.

The truth is that the scammer owns large amounts of the stock in question, and by promoting it relentlessly and encouraging its purchase, the asset’s price goes up (the pumping).

Once the asset is a price rises to the levels the scammer anticipated, they simply sell off the stock (the dumping), making lots of money in the process. If the investor owned a sizable percentage of the company’s stock, the investor who bought the stock, especially towards the end of the scam, will end up losing a large percentage of their initial investment capital.

Conclusion

Everyday, the Internet comes up with new ways for people to make money, and even more ways for people to lose their money. There are many online scams that promise very high profits when all they have to offer are devastating losses. Some of these methods include binary options scams, Forex trading scams; pyramid schemes, health affiliate schemes, and even pump and dump schemes.

Disclosure: Some links are affiliate links that earn me a commission.