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Stay away from quick, easy, risk-free investment schemes

FINANCIAL gurus would agree that growing money through investing is the most practical way to achieve financial freedom.

Investments such as mutual funds, variable universal life insurance, unit investment trust fund and stocks even allow people to grow their money without putting in so much time and effort.

Ironically, this idea has also opened the door for scams that have fooled the public to invest their money in get-rich-quick schemes.

These scams normally promise easy, guaranteed returns while looking to take advantage of newbie investors.

While seeking for opportunities to grow their hard-earned money, it is important for people to avoid putting it in the hands of fraudulent, although inviting investment schemes.

April Lynn Tan, vice president and head of research at stock broker COL Financial Inc., shared tips on how to spot investment scams.

If it’s too good to be true, then most likely it is

“Quick, easy and risk-free investments are most likely scams. If someone is luring you to an investment without risk, you probably are being scammed. In principle, investing is the discipline of managing risk. The more risk you take on, the higher your potential returns. Scammers usually prey on newbie investors looking to instantly double up their investment.”

Ask to put everything in writing

“Legitimate investments always involve some form of documentation. If you are being asked to invest your money without any kind of written agreement, then you probably must run towards the opposite direction. Note that even banks require you several documents when opening an investment account, no matter how small.”

Don’t fall for hard sell tactics (as in pay right away or lose the opportunity)

“The ‘hurry while investments last’ type of talk seems to be appealing. But don’t fall prey on this statement. Credible and legitimate investments do not have limited offers. Scams are built on deception. Legit investments are transparent, scams aren’t. People should know the characteristics of those scams that came and ran. It’s the same scheme over and over again.”

Conduct your own due diligence; don’t just believe in what the agent says

“People should do due diligence before investing. Check the background of the people running the investment company. If you can’t find the entity online, chances are high that it’s a scam. Do your own research. Find out the investment company’s registered name online, check with the Philippine Investment Funds Association or get the advice from a licensed financial advisor.”

Lessons

Investing isn’t about becoming rich overnight. It’s a process. It’s about building your portfolio throughout a long period of time and managing risk along the way.

One way to fight scams is for the government to provide more opportunities. Aside from greed and ignorance, one factor why these scams succeed is because people want to get more from life.

If the government could provide more jobs and benefits, there would likely be less victims. Scams rarely prosper in economically progressive countries because people really don’t see the need in joining.


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