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How to Know If an Investment Scheme is a Scam?

June 30, 2018
Javeria Atiq

Since the inception of the internet, each year ends up leaving thousands of people with loss of millions due to scams. The advancement in digital communication has opened doors for evils to do scams that are hard to identify at first place. However, the goods are also doing their best to let a layperson understand and evaluate the scams, before becoming a victim to them. However, if you are the one who is not familiar with the term investment scheme scam or any other such theft factor, we have compiled a comprehensive guide about investment scheme scams to help you identify the potential triggers and signals to play safe.

What is Meant by Investment Scam?

An investment scam is a term used for the act where the innocent people are robbed. Apparently, these people look really innocent, harmless and sincere and have deep knowledge of marketing materials and websites etc. One of the most common types of investment scam is where many people are asked to contribute into a project as an investor and after some time the scheme is showed to be failed to result in loss of all the money paid by the investors.

The enhanced patterns of digital communications have made the investment scams a bit more complex. Some of these investment scams look so real and convincing that you can find even a professional investor falling for them. The older people are found to be more on the top list of being the target of such scams. These people have lesser idea about the technological advancements and the possible threats due to it. The ideas may vary but all the investment scams have one thing in common- they claim to offer a higher level of returns on smaller investments.

How Can You Spot an Investment Scam?

With the passage of time, the crime has modified itself and you can find scammer running comprehensive website infrastructures with a convincing digital presence. This presence helps them look real and reliable to their victims. Thus before investing into any business or investment idea that is offered over the internet, check if the company is registered with the government authorities and do they have a valid registration with the legal authorities of the state or not.

Other hints that can be a warning sign about the scam of the offered business idea can be;

  • An unwanted approach to you,  that can be made by a text message, a phone call, a person knocking at the door or via email
  • Any approach that does not provide you a clear pattern to get back to the firm. It means that you are getting a call from a company that is not providing you with any of their contact details
  • When you are forced to make a quick decision and are forced to go for the option they are offering
  • You are told that you will get a higher return on investment with the lowest risk

What are the Common Types of Investment Scams?

The Cold Calling: Such scammers generally call you without any reference and show themselves as a stockbroker or a project manager. They tend to offer you an investment plan that can give you a higher return on investment and avoid mentioning any kind of risk. They will also try to convince you that the risk level is very low. They may also provoke you to invest in international companies or they will sound too much polite and friendly to even a harsh attitude. You may also find them consistent as they will keep calling you, back and forth.

Promotions & Tips: Such scammer will also encourage you to buy shares in company or stocks. They will also show their confidence in predicting an increase in shares in coming time. It is possible that they will contact you via email or a phone call to your local number of a cell phone. Such scammers are actually trying to boost the stock price so that they can sell their shares and make some considerable profit. Once you are done with buying such shares, the value will dramatically go down. In case of any such investment, you will be left with a huge loss as such shares are actually worthless.

The Investment Seminars: The investment seminars are generally promoted by motivational speakers, self-made millionaires or the investment experts. These seminars are meant to give advice on investment plans and the benefits associated with them. Such seminars and motivational lectures are designed to convince people for taking part in high-risk investments. This may include borrowing a large amount of money for buying property or investing in lending money with no security of return etc.

The promoters of such seminars make money by charging the attendants with a big amount of attendance fee or by selling overpriced books or reports, or by pushing you to buy property without any expert opinion. Such offers for investments are commonly overvalued and many end up having you pay commission and fees that are not clearly mentioned by the promoters. These are sale tricks that are misleading and led by false claims that pressurize you to invest in the idea. There are higher chances that investing it in such plans will lead you to loss of money.

Retirement Funds: These plans are designed to make you believe that you can access your retirement funds before time. They are mostly designed with the core idea of self-management of funds or for a fee. Such offers generally come from a scammer who pretends to be a financial advisor. The scammer will ask you believe on the story that you will get your retirement funds early than the designated time frame. Later, acting as your financial advisor these scammers will approach the company who is supposed to pay your retirement fund and will take away all the money with them, leaving you with nothing but regret. Or in another case, they will take a large amount of the funds as their fee and leave you with merely a small amount of what you actually own.

You must know that you cannot access the retirement fund until you reach the mentioned age limit. There are some exceptions to the matter like extreme financial issues etc. else than that, there is nothing that can lead you to early access to the funds, before time.

Warning Signs of Investment Scams:

Here is a quick list of simple and easy to understand signs to find out if the approach is any kind of investment scam or not;

  • You will receive repeated calls from investment advisors. They will try to keep you on call for a long time and prefer to make you talk to the seniors. They will also provoke you to act quickly otherwise you may miss the amazing opportunity of earning more from less.
  • You may get an email from a complete stranger who will offer you advice on the share price of any company. Such email may not address you personally or may give an impression as if it is sent by mistake.
  • You may get an invitation to a seminar making false claims like get-rich overnight, or risk-free investment etc.
  • You may get an invitation to attend a free seminar. Such scammer may act as a promoter who will also offer you loan to be a part of the amazing investment opportunity

How to Protect Yourself?    

You can protect yourself from such scams by considering the following piece of advice;

  • Never share your personal details with any stranger, caller or email sender. Do not reply emails that are offering you any kind of financial opportunity or advice. Hang-up the call and delete the email, all at once.
  • Always stay suspicious about  investment opportunities that claim to offer higher return with lower risk or even without mentioning the risk factor
  • Check the companies if they are registered with the Government and what is their market value
  • Never let anyone pressurize you and influence your decisions related to money and investments.
  • Never commit for any investment seminar and take time to consider the opportunity before taking  a final decision
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