The world can literally be in the palm of your hand, if you have a smartphone, access to the internet and of course to social media platforms. Personally, I joined a few Facebook groups where I can learn new things and ideas about investing, personal finance and minimalism. I also use Instagram to follow some travel, soccer and some funny content creators.
On 14 Feb, I shared a post to a Facebook group about a particular guy DM me on Instagram. The post had about 89 Reactions, 38 Comments and 15 shares. The engagement led me to writing this follow up blogpost. He wanted to help me understand that there are ways I can get ROI. Okay, his english is a bit weird, so this is what I think he wants me to understand.
FINANCIAL ADVISOR/INVESTMENT MANAGER ???
You can refer to the post I shared if you want to get some context on what happened. So this guy who DM me is apparently a financial advisor and investment manager as stated in his profile. He introduced me an investment opportunity – if I invest $1000, I can get back $3000 monthly, which is a return of 200% per month. I literally almost bust out laughing when I saw what he told me.
If that is true, my $1000 can become $500 million in 12 months. I wondered why isn’t he one of the richest men in the world. In my honest opinion, this is a HUGE red flag.
SPOTTING SCAMS
According to Cambridge Dictionary, the definition of scam is “an illegal plan for making money, especially one that involves tricking people”.
Some simple characteristics of an investment scam include:
1. Outrageous returns – such as 200% per month.
2. Guaranteed returns with no risk.
3. Keep asking you to send/invest the money NOW.
4. Risk free investment.
5. The advisor/agent/introducer avoids or is unable to answer your questions.
WHAT TO DO
Scams are everywhere and there are many different people who want to take our money away from us. We may be unable to put an end to these scams but there are a few things we can all do to avoid such investment scams. If you think this information is useful, please share with your papa, mama, ah gong, ah ma, uncle, auntie etc. Please help them.
HAVE SOME BASIC KNOWLEDGE
In order to gain some knowledge, we all need to find out. To find out more, we can read some books to gain financial literacy. Read the newspapers and watch the news regularly as “the latest scams” will often be reported. If you already know of people who got scammed, ask and learn from their mistakes.
ASK QUESTIONS
Before we can even ask questions, we need to know what to ask. It comes back to the first point of having some basic knowledge. I think financial literacy is fairly important in avoiding investment scams. Some simple questions can asking how is the money invested and what is the investing philosophy or methodology behind the investment scheme. If that person keeps avoiding the questions and diverting to other topics, then it is a red flag.
UNDERSTANDING THE INVESTMENT
If the investment is too difficult to understand, avoid it. If there is something wrong mathematically about the investment returns, avoid it. If the person introducing you the investment keeps beating around the bush, avoid it. Find out what are the fees and charges of the investment scheme. If you feel something is wrong, if something feels weird, avoid it.
SKIN IN THE GAME
Ask the person to show proof that he or she has invested in the scheme being introduced. Very often, this is not enough to prove the investment is real. Even more often, the person selling the investment may not make from the investment but make money from selling the investment. Ask for the track record and proof of withdrawal of the investment. Previously, I listened to someone shared with me some crytocurrency stuff when it was still the HOT THING. The person really put a lot of money into it. However, when I ask what is the method of withdrawal, the person told me it is impossible to withdraw money out for now. The money needs to stay there until some sort of IPO. Of course I gave it a miss.
FINAL THOUGHTS
Scammers are constantly finding new ways to trick people. If we want to avoid being scam, we must not be so gullible and need to do our own due diligence. I will always update my parents when I see news of new scams being reported. I hope you do the same too for your beloved ones. All of us worked hard to make money, don’t let the money go to waste.
What did you do to avoid scams? Let me know. Thank you for reading.
Disclaimer: www.engboonhow.com is an opinion based website. I am not a financial advisor, and the opinions on this site should not be considered as financial advice.