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Investment frauds aren’t new in the market, but it keeps evolving. Hence here are certain red flags you must avoid before making a investment.
Savings and investments are the essence of financial planning.
One is surely incomplete without the other. Though it might not feel easy to start investing, it can eventually become your prime source of generating wealth.
The best thing to do is to start with easy and small investment options.
The main thing to take care of is the platform that you are using for carrying out such investments.
Nowadays, a number of banks have started their own registered and secured trading platforms that you can use to start investing in different funds.
There are a number of financial brokers/ intermediaries/ experts too who can help you decide where, when, and how much to invest.
But, how would you know if the available platforms or the so-called experts are legit?
As per one of LocalCircles’s reports, around 42% of Indian investors experienced financial fraud in the past 3 years. Adding to that, out of these frauds, almost 74% failed to get their money back. Shocking, right?
You must have come across several such suspicious messages or requests that promise to double or triple your money within days
These numbers aren’t quoted to scare you or discourage your future investments. Rather, it is important for you, as an investor, to be aware of possible red flags in the investment market and build financial confidence to make the right investments
So, the next time you invest, check for the below mentioned investment red flags.
How to detect investment fraud?
1. Unlicensed Investment Professionals
Sometimes, a potential investment red flag is a fraud approaching you in the name of a ‘professional’.
They may themselves be just pretending to be one or might be selling their services in the name of someone.
To prevent such an investment fraud from happening, make sure to conduct a background test on your own.
Use searching sites, check for the worthiness, ask questions, check their license (if they are claiming to have one), see for the name of their company or brand, ask fellow investors, etc.
2. Exaggerated, false or suspicious credentials
Many times, frauds might approach you in a very sophisticated setting.
For example, you might be approached through a professional email. But as you go through the content, you will find exaggerated information.
Sometimes, an investment red flag can appear in the email address. You’ll find strange typos and words. Poor grammar is also sometimes a sign of fraud. These unsolicited mails will ask for your personal information and definitely claim to be from a renowned organisation.
3. ‘Too good to be true’ options
In such cases, the language and tone of the offer itself will present itself as an investment red flag that you should avoid
Some examples of these can be ‘invest here and get assured returns of xyz% within a week’ or ‘you are the lucky winner of this contest, to know further, fill out the given form’ etc.
Trust your gut and never click on such links and block & report them right away to avoid investment frauds
4. Pitches beginning with ‘everyone is buying it’
You must have seen people approaching you to invest somewhere without you asking for it. It is a potential investment red flag you should look out for.
And generally, their pitch begins with ‘this person invested through us and multiplied his/her money within 5 days, you can do the same…’. Never EVER trust such offers.
5. Constant pressure to invest right away
Now, a few times, the offers seem legit and you might be almost ready to try out the investment.
However, the investment red flag would be not giving you access to proper details, forcing you to invest right away, scaring you by saying that the offer might end soon, not giving your opinions validation, etc.
If something like that happens, then stop right away and do not share any sensitive information. They are definitely a fraud.
6. No proper documentation
In some cases, the fraud person/ company approaching you will not be able to show proper documentation or licences or certificates when you ask them, too. More likely, they will either make up something fake or keep making excuses while also persuading you to invest as soon as you can.
7. Use of various social media platforms
Social media have become common ground for investment frauds. With a simple OTP request or a link or message, frauds are able to get your sensitive information and hack your account. Beware of such ponzi schemes and avoid interaction with them.
8. Over-the-top and high-class pitches with no valid testimonials
This, too, is a very common approach used by frauds. They can create an entire fraud community with all false information and fake testimonials.
This makes it important for you to be financially literate and to do proper research before trusting anyone with your money. If you can, learn about investing on your own and invest yourself.
9. Asking ‘too personal’ details
Asking for OTPs, bank account details, passwords, pins, etc, are common types of fraud. As a smart investor, to avoid financial scams make sure you do not trust messages like ‘your account needs verification, fill the form below…’.
10. Forcing you to send money into a personal account
While investing through an agent, you may have to send money to the intermediary. However, the problem arises when it is not legit. When someone sends you any suspicious link or asks you to send money into a personal account, make sure you recheck everything. If things aren’t clear, do not carry out the transaction.
Now you know what not to do to avoid fraud, but how can you avoid these frauds? Sometimes, the deal may seem legit, and you may end up giving out some important information. To prevent such instances, do the following.
Things to do to avoid investment fraud
1. Ask as many questions as you can
After all, it's your money and everything you need and want to know must be provided to you. So before finalising any investment, clear your head of any doubts before investing to avoid any investment red flag
2. Run a background check
In case you are carrying out an investment through someone, it is always advisable to run a background check to be sure of the person you are in touch with to avoid an investment fraud
3. Carefully go through the investment related documents
Needless to mention, before investing, make sure you completely understand the terms and conditions of the investment, and there are no doubts regarding returns, profits, etc.
The above-mentioned tips can surely help you in protecting your investments and maintaining your finances. Make sure to go through this checklist carefully when you finally start investing.