How to protect your self from fradulent investment schemes

How to protect yourself from misleading or fraudulent Investment Schemes?

Every now and then, one gets to read some kind of fraud investment plans or fake how-to-get-rich-quick schemes. Having a deep thought over such incidents, we may realize that these scams are a reflection of our own over-attraction towards the investments, which yield good returns. But in such temptation of ours, have we ever thought of the danger or difficulty (risks) involved in the process.

“A danger foreseen is half avoided.” – Cheyenne Proverb

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The never-ending selfishness of making ‘easy money’ out of these flashy or cheap attractive way schemes is so intense that sometimes it even controls the financial wisdom of the investor. But, from our (the investors) point of view, it is very necessary to be careful to avoid the danger of such mislead schemes. This is necessary to protect one’s hard-earned money from getting dry away without a second thought.

Also, coming to the part of the investment, we ignore the

‘buyers beware rule’ and tend to be innocent. So how can you defend yourself? You need not try to learn all the ways in which criminals defraud people.
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A few basic precautions that will go a long way in protecting one’s money from fake investment schemes are:

Warning Signals of Fraudulent/false leading Schemes

Generally, a majority of fraudulent investment schemes have certain warning signs that follow a particular pattern. A scheme that posses of any of the following features must be considered with extra care/caution, before making any kind of investment:

  • Don’t fall for the word “free”

    Fraudsters tempt investors by conducting free investment seminars for the family including complimentary lunch. Many fall for this kind of strategy and invest in their product. But don’t do this mistake, don’t be in a hurry.

    Make sure you research the investment scheme and the person selling it to you. Know the business, the product and services offered and all the costs associated with the investment scheme.

  • Everybody is buying

    See if you are really interested in the investment scheme. Just because they tell that many have bought it, doesn’t mean, you should be buying it. Don’t fall for these kinds of tricks.

  • The pressure to pay money

    Usually, scam calls have a technique of telling you to pay money immediately to avail of the so- called “once in a lifetime opportunity”. And also tell you that if you delay, it would be over by then. Don’t fall prey to such tricks, take your time and research before you send money.

  • Promising high returns for

    A key rule to keep in mind is that high returns usually have higher risks involved. Therefore, the return on any investment cannot be higher without higher risk. If your money is safe, you will likely earn lower returns. Many fraudsters will convince you that high returns are guaranteed. Don’t believe such lies.

    Avoid companies that claim to give you guaranteed returns or double the returns in a short period.

    Scammers take advantage of people’s fear and greed to exploit them. They would tempt you with higher returns or scare you to make you act in haste. One example is fraudsters telling you that your account will be blocked.

    As a thumb rule, any investment that promises more than 12% yearly returns could be a scam.

  • personal room

  • Guaranteed high returns on investments

    Guaranteed returns aren’t true. Any investment in the market comes with its own set of risks. Therefore, the return on any investment cannot be higher without higher risk.

  • disciplined investor

  • Consistent returns

    Investments always experience fluctuations and hence the share price may increase or decrease. Be careful of investments giving consistently higher returns despite the fluctuating market conditions. There are higher chances of it being a fraud.

  • Unregulated investments

    Make sure to check if the investment scheme is registered with the SEBI (Securities Exchange Board of India), RBI, IRDAI or other regulators before investing.

  • Recommended foreign investments

    If you are suggested foreign or offshore investments from unknown people then consider it as a red flag. Once you’ve invested in another country, it’s hard to guard your investments. If something goes wrong, it’s hard to find what happened and locate the money sent.

  • Promises to be kept secret inner information

    Many money cheaters (swindler) tempts the investors by expressing their knowledge on the inside information. These people trade on this inside information, which they are otherwise required to keep as a secret. This trading is termed as ‘inside trading’ and all activities related to it are considered illegal by the market watchdog SEBI (Securities and Exchange Board of India). Such dishonest activities can also lead to punishment.

  • Difficult business models

    If you feel it’s complicated and you don’t understand a company’s products or services, then avoid investing in such companies.

    You could also check a company’s credentials and track their past records. You could know how long it’s been since its inception. If it’s only been there for a short
    duration, you could avoid investing in such companies.

Responsibility for protecting your own money

Everyone has a self-liability or responsibility to protect their hard-earned money. As mentioned earlier, there is a golden rule for investors known as ‘buyers beware’ or Caveat emptor. To help you make better investment decisions, one must follow the checklist given below to avoid falling prey:

  • Investigate before investing

    Unsolicited emails, company news releases, tv commercials, or phone calls can’t be the reason you invested in a company. Before investing understand the company’s business, products, and services. Check the company’s financial statements and then if you are interested you can go ahead and invest.

  • Ask whatever questions you have in mind

    Fraudsters don’t want you to investigate. So take your time to investigate. Asking a few basic questions from the start, can avoid trouble and losses later. Thoroughly investigate the background of the investment broker with whom you intend to do business before you pay them.

    Whether you are a beginner or have been investing for a long time, it’s never too early or late to ask questions. A good investment advisor would be ready to answer your questions. They know that an educated client is an asset.

  • Carefully read all the documents:

    One must read all the information related to the investments before making any kind of decision. This includes the terms and conditions mentioned in the document. Also, check for offer documents and the prospectus of the investment for knowing about its important aspects like policies, objectives, and risk factors. Other than this, another good practice one should follow is looking for public information on websites of SEBI and other stock exchanges.

  • Choosing the right and dependable advisors:

    Before you invest, check the advisor’s credibility, even if you know him socially. One should always keep oneself updated on his/her investment advisor’s background or qualifications. This can be done by asking for his registration and recognition details. For example, before taking advice from a stock-Also, be aware of the broker, one should verify if the person is associated or registered with SEBI. Practices like these are always a good idea and should be followed.

  • Reporting Injustice

    Investors, who have fallen kill to fake investment schemes, can address their complaints to authorities like SEBI and even the product’s authorities. In matters of investment, it is considered a much better option to be slow and steady like a tortoise instead of being careless like a hare or rabbit.

    Also, one must always remember that a systematic and continuous investment lets you earn a more fair return than a fake get-rich-quick scheme, which can even cost you losing your hard-earned money.

  • Beware of online frauds

    Protect yourself online and also your social media accounts. Don’t judge an investment scheme by a company’s attractive, professional-looking website. Anybody can create one.

    Also, be aware of the frauds happening around you. This is one of the best ways to protect yourself from ongoing fraud.


Have you been defrauded with any investment schemes?

Not anymore! As you now know the signs of fraudulent Investment schemes, it’s your responsibility to protect your money.


Choose your investments wisely!

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