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How do you spot investment scams? A common question asked by many.

Everyone wants to make more money, and an opportunity to invest in something profitable may sound like a great way to do it without having to work hard. Most financial coaches, educators, and advisors would agree that growing your money through investing is one way to achieve financial freedom.  However, you need to investigate any investment opportunity very carefully before putting your hard earned money into it.

In the Philippines, investment scams are a special kind of fraud in which individuals pose as investment brokers or financial advisers  and try to get you to turn your money over to them. You must know the signs to watch out for when suspecting a scam. Hence, you need to know how to investigate offers and respond to suspected fraud.

I think, every year, thousands of people in our country are victimized by scams and lose millions of pesos. We can never stop scams so the best way to fight them is to be financially educated. Today, I will be giving you some tips on how to spot investments scams.

1. An investment scam promises guaranteed return with NO risk.

If someone promises you an investment without risk, tell this to yourself over and over as they go on with their sales talk: “You are getting scammed.” I have learned from different seminars that investing is a long-term process. Investing is not about becoming rich overnight. It’s about building your portfolio for a long period of time and managing risk along the way. Remember that all investments carry risks. Beware of investments that offer high returns at little or no risk. If they offer you a monthly guaranteed return, dear friend, it’s best for you to run the other way and stop entertaining them. My advice is to always consider “guaranteed return” as a red flag.

Many investment scams offer lucrative promises to lure investors in, commonly targeting newbie investors. Do avoid investments that offer promises that seem too good to be true. To encourage you invest, they may show you a history of returns. If you see results that claim to be positive month after month, and quarter after quarter, you should be skeptical. Even the best investors in the Philippines experience some ups and downs. Don’t enter into quick, easy, and risk-free investments.

2. An investment scam only earns from Recruitment and Membership Fee.

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“Open-minded ka ba?” Sounds familiar right? These are the usual words we can hear from the people who invite us. One type of fraud takes the shape of networking schemes that rely on the number of recruits you introduce to the business. This is most commonly known as ‘pyramiding scam.’ It’s a scheme where profits are taken from the payments of recruits and not from the actual sale of products and services.  If you will examine this scheme, it all boils down to an endless chain of recruitment. You can make money by inviting others into the program and letting the recruits do same. They will be required to pay a certain amount and all you have to do is invite as many guests as you can to earn.

I’m not saying that all networking companies are scams. But if you haven’t been getting your pay check, then maybe it’s time to accept that you’re not getting it at all. Sad to say, my friend, you’ve been scammed!

3. An investment scam jumps into the Bandwagon – Everyone is doing it so it’s Legit!

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I would agree that the bandwagon effect can be a problem. Do not allow yourself to be easily swayed by the majority. Do not be quick to believe successful claims or impressively articulate sales talk from randoms. Remember, scammers are well-trained. They’ve done their speech a thousand times before so it’s bound to sound professional and excellent. You have to keep your own counsel and be open to attend financial literacy seminar. Invest in yourself first because investment in knowledge always pays the best interest. As what Benjamin Franklin said, “There’s always power in education!”

4. An investment scam has Fictitious/never-heard-before track records.

Investment scams often claim to be well-established in order to gain your trust. They may claim to have many years of experience and make large profit out of their investments. Some also use fake testimonials of “satisfied investors” to shore up their credibility. If you can’t find the investment company online, chances are high that it’s a scam. The secret is to do your own research. Verify the investment company’s registered name online, check it with the PIFA (Philippine Investment Funds Association), or get an advice from a credible financial advisor . There’s no such thing as too careful, especially when a lot of money is at stake.

Do not be pressured to hand over money or sign any investment deal right then and there. You can conduct a background research first before you decide where to place your hard-earned money. If the firm is reputable, then it should have a name you can recognize or a history you can trace. If you cannot track the company or the individual broker’s history, you should be extra cautious.

Examine and study the investment proposal, the Securities and Exchange Commission (SEC) said. To know more about their checklist on how to protect yourself and your money against investment fraud, please click this link https://www.pna.gov.ph/articles/1072421

Some investment scams may even claim to be regulated by the relevant authorities to mislead you. Check on the company background, the credibility of its owners, directors and management members,  the principal office, nature of the business, compensation system, its primary license to operate as a business, and most importantly, the secondary license to solicit investments.

Here’s the thing: it is easy to get a primary license and register a business. But to operate as a business and to solicit investments are two different things. If it involves the latter, a secondary license would then be required. Many scam companies claim to be legit because of their primary license with SEC. Yes, they are allowed to sell products and services. But the question is,  do they also have a secondary license that allows them to receive investments from people? None. So don’t be deceived! Know what is legal from what is not!

Ask someone you trust to help you with your checks if necessary. You can also send us a message here, set an appointment for FREE so we can assist you personally or better yet, attend our Personal Finance webinars. Register here:  https://bit.ly/FinanceWebinar_FREE. Always arm yourself with information. Learn to spot the red flags of investment fraud so you can protect yourself and your loved ones.

About the Author:

ELBERT JOHN EVANGELISTA

He is a graduate of Pamantasan ng Lungsod ng Valenzuela with a degree of Bachelor of Science in Business Administration major in Financial Management. EJ is an entrepreneur, and investor in Mutual Funds, Healthcare and Insurances because he knows that these are the proper ways of building a solid financial foundation. He plans to retire at a very young age. One of his goals is to become a CEO at 25. For him, there is no limit in achieving your dreams as long as you have a great vision to pursue them and that through knowledge and discipline, financial peace is possible for all of us.