Most financial gurus would agree that growing your money thru investing is a practical way to achieve financial freedom. Investment options such as mutual funds, VULs, and UITFs even allow you to grow your money without putting in so much time and effort. Ironically, this idea that you could grow your money without micro-managing your investments has opened the door for scams.
These scams typically disguise themselves with the promise of easy, guaranteed returns while looking to take advantage of newbie investors. As you explore different opportunities to grow your money, it will be crucial to avoid putting it in the hands of fraudulent—albeit enticing—investment opportunities. Here are some warning signs that you should look out for:
1. ‘Quick, easy, and risk-free investments’
If someone is promising you investments without risk, tell this to yourself over and over as they go on with their sales talk: “You are getting scammed.” Investing is the discipline of managing risk; the more risk you take on, the higher your potential returns. If you’re offered deals like an absurd 80% return in one week, then it’s best to get your cards off the table. This method is called phantom riches and is used to prey on newbie investors looking to instantly double up on their investment.
2. More recruits mean better business’
“Open-minded ka ba?” One type of fraud takes the shape of networking schemes that rely on the number of recruits you introduce to the business. More commonly known as ‘pyramid scams,’ these fraudulent business models use first-hand testimonials by their ‘business partners’ to lure in warm bodies. Once convinced, they will be required to pay an entrance fee usually ranging from P10,000 to as much as P50,000.
That’s not to say that all networking schemes are fraudulent. But if you haven’t been getting your pay check for a while, then maybe it’s time to accept that you’re not getting it at all.
3. The ‘everyone is doing it so it must be legit’ catchphrase
One big mistake of new investors is believing successful claims and getting overwhelmed by impressively articulate sales talk. Remember, they’ve done their spiel a thousand times before so it’s bound to sound professional and excellent. Most importantly, a large network/company doesn’t guarantee that it’s legitimate. Be skeptical. Scams like Emgoldex, One Lightning, Success200, and One Dream Global have ripped off a lot of professional investors with their deceptive branding.
4. ‘Now you see me, now you don’t’
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. Search for the investment company’s registered name online, check with the PIFA (Philippine Investment Funds Association), or get the advice of a credible financial advisor. There’s no such thing as too careful, especially when a lot of money is at stake.
5. The ‘hurry while investments last’ type of talk
Reality check: you won’t find investments in the department store. Credible investments do not have limited offers. This technique is done by smooth-talking fraudsters looking to cash in a little extra before booting out of the country. They would often rely on urgency, very technical explanations of the investment, and special—limited time—offers.
Investing is not about becoming rich overnight. It’s about building your portfolio throughout a long period of time and managing risk along the way. Warranted skepticism is valuable when it comes to building your finances. Don’t be afraid to ask the hard question: “Is this too good to be true?”