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Investment Scams – How Can You Avoid?

With this COVID-19 pandemic creating havoc in everyone's life and businesses, most people are affected badly and some even lost their earning power and some are short of financial resources and desperate to find ways to increase their income.

Amid this desperate situation and when people are looking at ways to earn a living or improve their income, some will think by investing in some financial instrument will be the way to go and earn more income.

With the bank interest rate at all time low, people will believe putting their money in the bank will not give a good return, human being by its nature, will always look for high return on investment, hence we will tend to look at investment instrument to boost up our returns and make more money.

In the eagerness to go after high returns on investment, people tend to forget the basic rules of investment, and the saying of Too Good To Be True especially those schemes which promised return of investment of more than 10% per month.

In the News published by The Straits Times of Singapore on 3rd April 2021 under the heading of Promised Big Returns, Only To Leave Many High And Dry, it was reported that a total of 15,756 scams were reported in 2020 and one of the scams involved cryptocurrency trading platform and there are quite a few such platforms in Singapore which are not regulated by MAS - The Central Bank of Singapore, more commonly known as Monetary Authority Of Singapore.

Even the Prime Minister of Singapore also said in his Facebook page that his profile has been used by some platform, see the link below

https://www.facebook.com/leehsienloong/posts/4204585826270758

So you can see those scammers will take whatever actions and tricks they can to get people to invest in their platform.

Every day, we can read about people being scammed and with internet now more popular and easily accessible in everywhere, it is even easier for scammers to take advantage of human greed and cash in on this.

Therefore, how do we detect and learn how to spot investment scams?

1. Risk Factor

Every investment carries risk and if someone tells you what they offer do not have risk or very low risk, go back to the basic motto of investing -- Too Good To Be True.

With internet and other resources, if one come across such an investment plan, do carry out your due diligence and research especially for those investments plan which claim to offer very good return with low or no risk, and if this is being offered online and you can not even meet up with the promoter of the plan, it is advisable to just drop this plan.

2. Prove of track records

when someone promote their investment to you, and claimed they can generate good and high returns, do ask them to show documentary proof that they themselves have used the same plan and generated so much profit and make sure the proof being shown are statement from a Trading House or Bank which showed the promoter account with the transactions, if the promoter of the investment plan is not willing to provide such a proof of track records, it is advisable to walk away from such investment plan.

3. Regulatory Framework

If the scheme is not approved and monitored by the Center Bank of the country where the investment plan is originated, then chances are the scheme is a scam, even it is not scam, it is doubtful investor may be able to get back their money or simply put - is the investment money protected in the event the investment go south and fail to generated the returns as promised.

4. Guaranteed Returns and Investment

If the investment plan promised guaranteed return and investment amount is protected, all the more we need to carry out a thorough due diligence and check with the relevant authority of the authenticity of the plan and who are the people behind the plan whether they are on the white list or not.

5. Influence Tactics

Some plan will always tell you the offer is expiring in one or two days and if you do not take advantage of it, you will lose a lucrative return or discounts being offered, which on the surface of it, look like a good bargain if you invest now and can get an even higher return than promised.

This tactic is to take advantage of human perception that scarce opportunity is a good item and should take advantage of it.

6. Referral Scheme.

Some investments scheme offer referral scheme, that is if you bring in certain investors, the platform will reward with you some monetary rewards or certain percentage of the invested amount of the investors you bring in to the plan or scheme.

It is quite unusual for any scheme to offer commission to investors who bring in investors to the scheme and if it is a legitimate scheme, all they need to do is to just publish a prospectus and let those who are interested to invest in, no need to incur additional cost for the plan.

7. What Are Available For Investor To Verify.

In Singapore, one can always go to Monetary Authority of Singapore (MAS) website to check on the validity of the investor plan, and if it is an oversea plan, they always search on the net with website like the SEC alert list such as .

1. https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investment-0

2. https://www.usa.gov/scams-and-frauds

These are just some issues about investors scam which we should be aware of, and if you have any ideas or wish to share your experience, do share it below in the comments section below.

You only live once, thus, it is important that we do not waste our life savings to scammers in our eagerness to generate more returns on our investment.

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