10 steps to spotting an investment scam

Be it a forex scam, gold investment scam, stock exchange scam, marketing scam or what so ever scam that related to fast money. There are few symptoms we can take note on. I have families and friends were victims to the scam. If you encounter any of the symptoms below, you are in deep shit.

  1. No such thing as guaranteed return. Eg. 3% per month, 8% per month and etc. If there are term guaranteed (it is either scam or illegal). Investment or business always have risk. Regardless how good the risk management, there are no guaranteed. There are always up and down for an investment and business.
  2. Fund manager must be licensed and register under certified bank/financial firm. A popular modern-day scam is the signal seller. Signal sellers are people who may be a retail firm, pooled asset manager, managed account company or individual trader who promises to trade based on professional recommendations that will make anyone wealthy. Brokers who are not regulated by the CFTC, NFA or their nation of origin.
  3. Company provide the platform must be national bank certified or legally license. If you not sure if that is legally license, you can go to the national bank sites and send the email to them for verification. Even though it may sounds non related if you send foreign countries trading platform to your local national bank but actually they can help to investigate and provide you an answer.
  4. All statements (financial and profit) must be certified by licensed financial firm. If you do not sure the financial firm is licensed, you may check with the national bank.
  5. Every business have to pay tax. The country tax must be imposed on the company provide platform with public visibility too.
  6. No minimum/fix investment to join. Eg, you need minimum 5k, 10k, 50k and etc, because investment can start with any amount subject to the terms and condition.
  7. No locking period for investment. Other than bond or FD, most investment do not fix you with a locking period. If it does, it just basically take your money to do something else that you have no visibility. You must be able to withdraw your money at anytime even profit or loss, or when problems exist within the trading station.
  8. Conduct bunch of free talk or seminar that doesn't teach you how to trade on your own but teach you how to find people to invest. Or inform you how much you can earn per month/annum. Worst case teach you to invest more money into it for higher return. No doubt higher capital comes with higher return but how about when loss. The effects is just the same. If they told you with non-sense risk management of higher capital with lower risk, you should start buy some risk management books and study on your own.
  9. The ability to work automatically. This means invest and it automatically helps you to trade. Come on, that is too good to be true.
  10. There are no information of the firm, agency, broker, fund manager or what so ever professional information can be found from license financial firm or national bank. As long as it is not authorized or licensed, just don't be stupid to head in.

Most of the time, people who had steps in to the scam program, are often desperate to get more money or get more people to invest more money. Why scam can be successful? Basically it just played with human greed. A greed of money in short term or so call fast money. Some scam will even told you that be the pioneer always earn more. Well, I do agree at some point. Those network marketing or scam always success with this. Before when public realize it is scam or been blacklisted at national bank, the pioneer had earn a big lump sum.

Scam thingy are often non long lasting. I had seen people that success is scam in first few years, and right after the so call "business" been blacklisted, they basically have no source of income. At that stage, they had no choice but to get another group of scammer and create another scam group. Ideas are the same but the concept and approach are different.

If any families or friends of you were obsessed with the scam scheme, there will be some symptoms too. You can refer here.

Another interesting articles from investopedia.

Spotting A Forex Scam

Is Your Forex Broker A Scam?


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