What is an Investment Scam and How To Avoid Them (Part 2)
On the first part of the series, we have discussed what is an investment scam and ways to spot them. Now, in the last part of the series, we will give you guidelines on how to protect yourself from being duped by these scams.
How to protect yourself from these scams?
- Know the red flags that could suggest that a company or the person you are dealing with is a scam. Click here to see the red flags of an investment program.
- Get a second opinion before you invest. Ask reliable sources, consult a qualified advisor, lawyer or accountant and be skeptical about investment opportunities that offers high returns in a short period of time.
- Check registration on Securities and Exchange Commission (SEC) if the business is legitimate and is duly registered to sell investment products. If the company is not registered or there are warning from SEC about a company being a scam, then you should already consider it as a scam.
- Do your research about the investment opportunity. Understand how it works, the risks, the return of investment and any fees involve. Make sure that it is aligned to your financial goals before you consider investing on it.
- Reject cold calls or unsolicited calls that offers you investment opportunities and refrain from giving out any personal and financial information until you have verified that you are dealing with an authorized person or legitimate company.
- Be in charge of your money. Beware of a person that claims to be a financial professional who proposes of putting your money in an investment that you don’t understand and assures you that he or she will take care of everything. Never trust anyone who wants to get your money immediately and then sit back and wait for results.
- Be vigilant. Be wary of any salesperson who pressures you to invest your money to them immediately or who would want you to make immediate financial decisions. Take time to research about the investment, educate yourself about the risk involved and make sure you understand everything before you even consider investing. A good financial advisor will give you all the time you need to make an informed decision.
- Check the retrieval of your principal or how to cash out profits. Take it as a warning sign if you are having trouble retrieving your principal or pulling out your profits and be skeptical if a financial planner, stockbroker or any individual goes a long way to explain why your investment cannot be retrieved. You have all the right to demand and know the reason why they cannot release the funds within a reasonable amount of time. Moreover, if you are not investing your money in a product with a fixed term, then you should be able to retrieve your money in a short period of time.
If most of the warning signs are apparent to the person or company you are dealing with, report it to SEC’s Compliance Monitoring and Enforcement Department at +632 724 7650 or +632 727 2267 or contact National Bureau of Investigation (NBI) or Philippine National Police (PNP) in case of emergency.
The takeaway
Constant vigilance is a necessary part of being an investor. Don’t be afraid to ask these questions before you consider investing:
- What is the background of the company?
- How much is the minimum placement for investment and what is the rate of return?
- How does this investment make my money grow?
- How can I retrieve my principal or my profit?
- What are the risk involved in investing my money?
Getting rich in investment does not happened overnight. A true investment is about building your portfolio and making it grow over a long period of time with a degree of risk involved.
