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How to Spot and Avoid Investment Scams

Time and again, many Filipinos including OFWs fall prey to different types of investment scams every year. And while one might argue that this is to be expected since many of us have not been exposed to any kind of formal financial literacy training, the growing number of victims and the amount of money lost to illegal activities  such as this cannot be overlooked.

In general, people are attracted to the promise of low-risk high-reward ventures. Even the slightest probability of earning something out of nothing can turn heads almost automatically, but not enough for people to ask the more important questions such as “how is this possible” and “what are the risks involved?” And while such questions aren’t very appealing conversation starters, stating them out in the open could spell the difference between losing and saving your hard-earned money from malicious scammers and opportunistic entities. If you want to know more about the ways on how to avoid investment scams, here’s how:

4 Ways to Protect Yourself from Investment Scams

In one way or another, we’ve all heard about investment scams circulating in the news or online. However, what if this time around, someone you know offers you a seemingly sound investment opportunity? What are the things that you need to consider first?

1.      Don’t believe all the reviews you read online.

The internet has brought us so many things to be thankful for. And while accessibility and connectivity are among one of them, the promise of easy money is not. Anyone can put anything on social media, and just because something is “trending” does not mean that it is useful or beneficial to you, personally.

If a friend recommends you a health product that he or she claims to be very effective based on their personal experience, that does not make them a doctor or the authority for deciding what is good or bad for you. First and foremost, do some research to find out more about the product, or in this case, the investment being offered, before you make a final decision. Don’t get caught up in the hype you hear from your friends or the people who talk about the product online.

And finally, remember to validate whether the company or group in question is licensed and authorized by the Securities and Exchange Commission (SEC) to offer and undertake investment activities. As a general rule: the more you know, the higher your chances of avoiding falling prey to investment scams.

2.      Review this checklist of the classic red flags of investment scams.

Stories of investment shams have been there for quite some time already. The just keep on coming back and are introduced differently, so it’s not really important to know about how an investment scam specifically works, but knowing the general characteristics or features of investments can help you weed out the legitimate ones from those which are not. Here are some of the classic red flags that you need to be wary of when exploring an investment opportunity:

  • Get-rich-quick arrangements
  • Immediate, significant earnings with little to almost zero risk
  • Heavily supported by too-good-to-be-true testimonials from mostly members and/or investors
  • Time-pressured proposals and seemingly very simple investment methods
  • Open house demonstrations with free food, refreshments, and/or other freebies to promote an investment
  • An investment system which is misleading, vague, or are built on “secrets”, “special connections”, and “insider tips or information”.

3.      Ask about the mechanism of the return of investment.

The selling point and the biggest giveaway to identify an investment scam is the promise of huge returns over a short period of time with very little to zero risk.

If that’s the whole point of the investment – then take that as an “Aha!” moment because there is no such thing, my friend!

Any decent investment offer will not guarantee to make their investors rich overnight, or in a matter of few days, weeks, and even months because the way legitimate investments work requires time to grow the money pooled in.

Therefore, should you decide to engage an investment agent, be sure to enquire thoroughly on how the company is going to use the money to create income for their investors. Are they earning profits off of selling a product or a type of service? Or are they simply using the money invested by new recruits to pay off their previous investors?

If the process leaves you feeling lost and confused, then chances are – you might be in a situation where you should not be involving yourself in.

4.      Do a quick background check on the person offering you a sale.

If you’ve noticed, some people in your contact list, probably on Facebook or in other social media platforms, would once in a while post something on your feed or send you an invitation message regarding a product or investment venture that would have most of the points in the checklist in point #2. But, being your “contact,” sometimes it’s hard to say “no” right away.

So, what you can do is to hear out the person first, and ask the right questions to help you decide whether or not you should continue the conversation or if the product offered is worth any of your time.

Additionally, you need to review the person’s qualifications in the industry. Do not just simply agree to shell out any amount of money based on how personable or seemingly trustworthy the person is. Does the person possess the qualifications and training (and a license even) to sell a product? Are they in any way connected to a financial group or a reliable investment brand? What is the person’s experience and background in the industry? Dos the person hold any notable achievements or conflicts with previous investors?

If you are genuinely interested to know more about an investment offer, best do it officially. How? Go to the person’s office and discuss your concerns or reservations in detail, and at the same time request for official documents that can support the legal operations of the company you would like to invest on. Be sure that you are dealing with a reputable and legitimate company, and not just an individual person posing as an agent or investment officer for a “company.”

You may have your own experience with an investment opportunity, and whether or not you have gained success in this venture, it’s very important to raise people’s awareness regarding incredulous offers and systems that aim to steal other people’s hard-earned money through lies and false promises. Share this post with your friends to help them avoid falling victims to investment scams.




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