Updated: Sep 06, 2023

8 Investment Scams That Millennials Should Beware Of

Watch out for these common scams that prey on unsuspecting individuals, especially ambitious millennials and young adults, who want fast-growing investments.
Today's Rates
Super boost your savings with highest rates.
Savings Accounts up to:
5.35% APY

One of the many things that young adults have to start thinking about is saving for the future. Building a strong nest egg is essential to a secure future.

Most investments are not particularly exciting. Investing in index funds can give you steady returns, but you won’t become an overnight millionaire.

You might be tempted by alternative investments that provide the potential for much larger returns.

Unfortunately, many of these investments are sketchy at best, and flat-out scams at worst.

Here’s a list of common investments and scams that millennials should try to avoid, and what to do to make sure you don’t get caught by the scheme.

1. Pyramid Schemes

Pyramid schemes advertise the ability to earn huge amounts of money with only minimal work.

They claim that you can use leverage your network to create your own business, to the point where you won’t have to do much work yourself.

The way a pyramid scheme starts is by getting you to start selling a product.

For example, let’s use candles.

You sell candles to your friends, and you get to keep some of the money from each sale. The pyramid scheme company also tells you to recruit your friends to sell candles.

For every candle your friend sells, you get a small cut of their income. If your friend recruits someone, you get a small portion of that person’s sales as well.

Eventually, you have a pyramid of people under you selling candles, and you get a small cut of each sale.

The scam comes from the fact that you need to purchase the inventory yourself, often at ridiculous prices.

Usually, there’s also a huge minimum order. To get started you might have to buy $500 worth of candles. If you can’t sell them, you’ll be out your initial investment.

You can also easily alienate your friends by constantly trying to sell to them, making this scam a danger to your finances and relationship.

If you get trapped in a pyramid scheme, the best thing to do is cut your losses and stop buying inventory and trying to sell yours.

Obvious giveaways:

  • You have to recruit others to sell product
  • You have an upfront cost

2. Ponzi Schemes

Ponzi schemes are now well known, thanks to people like Bernie Madoff.

Someone comes to you offering an amazing investment with huge guaranteed returns.

What’s really happening is that the schemer is constantly soliciting new investments from people, but not actually investing the money at all.

It uses the money from new investors to pay out old investors, skimming some off the top for themselves.

While Ponzi schemes can be hard to identify, be wary of anyone advertising huge, guaranteed returns. If you think you might be invested in a Ponzi scheme, pull your money out as quickly as you can and invest it somewhere else.

Obvious giveaways:

  • A guaranteed return on investment that appears too good to be true
Compare Investment Options
Act now to maximize the growth of your finances with one of these investment platforms.

3. Internet Fraud

Millennials are more online than nearly any other generation, so they are ripe targets for internet fraud. It comes in a variety of forms.

For example, catfishers will pose as someone else, often on a dating website.

They’ll ask you to send them money or gifts, but come up with excuses to not meet with you in person.

Eventually, they’ll disappear, taking your money and gifts with them.

Other companies might offer to pay you to advertise their products on your social media platforms.

They claim to pay you to post certain things or take pictures with their products.

In the end, you won’t get paid and the scammer will have gotten the advertising for free. Worse, if your followers notice your blatant advertising, it could affect your credibility.

Be suspicious of anyone asking for or offering money online. If you get caught in one of these schemes, stop sending money to the person, or demand payment in advance.

4. Boiler Room Schemes

If you’ve ever seen the Wolf of Wall Street, you know what a boiler room is.

A boiler room scheme involves a large number of salespeople calling people and offering them what appears to be an amazing deal.

Hugely discounted vacations, cheap office supplies, or goods that are supposedly high quality.

In reality, the products or vacations are nothing like what is advertised, and they’re generally nearly worthless.

The salespeople make huge commissions on each sale, so it can be an attractive job for people who need money. The buyers are vulnerable because they are getting offered an amazing deal that they won’t get again if the pass up on it.

If someone tries to recruit you for a job and advertises huge commissions and easy sales, refuse.

Also, be suspicious of anyone offering huge discounts on products, but pressures you heavily to buy now.

Obvious giveaways:

  • Convincing brokers that invoke the feeling of "fear of missing out" on a supposed lucrative investment

5. Investment Loans from Untrustworthy Lenders

If you’re a young adult, you probably don’t have a huge amount of savings available to you. If you need capital for a business venture or an investment, you might turn to a personal loan to cover the expense.

Traditional lenders, like banks, often have long application processes and strict lending rules.

You might be approached by someone who offers a quick, easy loan.

The scam is that these loans usually have huge fees and a ridiculous interest rate. Worse, they’re often not well-documented, or you might not have a contract at all.

If you fail to make the payments, the lender might resort to extra-legal efforts to make you pay the money back, including physical intimidation.

Obvious giveaways:

  • Little information about the lender is made available

If you ever need a loan, make sure to get it from a legitimate lender. If you do get one from a less-than-reputable lender, do whatever you have to do to get out of the loan, and use a reputable lender next time.

6. Pump and Dump Schemes

Pump and dump schemes offer huge profits for small investments, but usually, the scammer winds up with the money and you wind up owning something worthless.

Pump and dump schemes rely on the law of supply and demand. If demand for something goes up, so will the price.

Usually, pump and dump scams target low-cost stocks for small companies.

The scammer will form a large group of people and tell them to buy up a lot of the stock. The huge number of buy orders will drive the price up.

The scammer will eventually tell the group to sell the stock. At that point, it becomes a race to sell the stock as the price drops lower and lower, generally falling far below its starting cost.

The scammer makes their money by selling their shares first, at the peak of the scam, before telling anyone else to sell. This means that most of the people in the group will be left owning a worthless stock.

Avoid these scams by not taking investment advice from someone who says they have stock tips that will give you a huge return on a small investment.

If you do get caught up in one, try to sell the stock and chalk it up to a learning experience.

Obvious giveaways:

  • Stock tips that don't appear to hold much weight

7. Unregulated Cryptocurrencies and Exchanges

Cryptocurrency is the latest big thing in the world of technology and finance.

Bitcoin, Ethereum, and even cryptos like Dogecoin are being traded at crypto exchanges all around the globe.

Because the technology is so new, the price of these coins is incredibly volatile. If you buy and sell at exactly the right times, you can make huge amounts of money. If you do it at the wrong time, you could wind up losing huge sums.

If you do want to be involved with cryptocurrencies, treat any purchase like buying a lottery ticket.

It’s fun, and you might make some money, but you’re more likely to wind up losing in the end.

Don’t buy crypto with money you can’t afford to lose, and make sure to buy more traditional investments if you’re saving for the future.

8. Cheap Real Estate

Young adults typically are looking for a way to get on the property ladder.

It gives you a place to live, you don’t throw money away on rent, and housing prices always go up, right?

Some scammers will offer you incredibly cheap real estate that seems to be in good condition. The only term they demand is that you don’t have a property inspection prior to the purchase.

The problem is that once you buy the property, you’ll find significant problems with the building, the foundation, the plumbing, et cetera, which will cost tens of thousands of dollars to fix.

You might also be tempted to buy a home and rent out the spare bedrooms to local college students or other tenants.

In reality, being a landlord is hard and finding a property that is good for renting is difficult unless you know what you’re doing.

When getting involved in real estate, make sure you know what you’re doing, and be wary of any deals that seem too good to be true.

Obvious giveaways:

  • Properties priced to sell
  • Properties on the market for a long time


Young adults are particularly ripe for financial fraud because they are often looking for a way to get started on the path towards healthy finances.

Be wary of these scams and use more traditional methods to get started on the right financial path.