Have you ever been duped or lured into investing your hard-earned money as an OFW by the promise of high returns in an unscrupulous financial investment scheme? If yes, sad to say, you are not alone as more and more OFWs have fallen prey to numerous fraudulent transactions. Needless to say, these scams eventually lead to loss of trust and confidence among friends whose only wish was for their earnings to generate the promised high yield returns. Are there practical tips on how to protect yourself from fraudulent investment schemes? The answer is yes.
However, you have to bear in mind that being financially literate is the best weapon against fraud or dishonest schemes. Below are five ways on how to tell if an investment scheme is a scam so that you will be guided in your financial decisions in the future.
1. Educate yourself and understand the business model
It is not enough to have good intentions like making your money grow or helping someone with a business venture. If you want to be successful in your financial investment journey, one of the most important things to remember is to educate yourself and understand the business model before making any financial decisions.
If the company has a vague investment methodology and fails to explain how you will possibly generate returns, chances are it is a scam. Don’t make a decision until you empower yourself and you've thought about it a hundred times over.
2. Promise of high return in a short period of time
Just like planting a tree, one fundamental principle of acquiring wealth is its being built over a period of time. In other words, there is no such thing as being an instant millionaire in a short span of investing. The reason why many people are being tempted to invest their money is that they are blinded with promising rewards or potential high returns.
Remember, when greed controls your emotion, lapse of financial judgment occurs. When you have been promised exorbitant returns and you think the offer is too good to be true, it probably is. you've got to be cautious and think long and hard before committing.
3. Investment company has a good reputation and leaders have integrity
While it is true that most investment instruments come with certain risks, it is worth paying attention to the credibility of the leaders and the investment company itself. Check out everything — no matter how trustworthy the person seems who brings the investment opportunity to your attention.
The proven track record of the leaders or founder including his past performance indicates the integrity of the company. If people involved have record of unethical fraud practices, you should be wary and seek advice from experts. Do your homework and learn more about people and the investment company before it's too late.
4. Earning money without product movement or services
When you decide to invest in any financial investment vehicle, make sure there is an outright product or services being received. Fraudulent investment schemes, needless to say, focus solely on recruiting new distributors, not the products. Be cautious about people who are trying to persuade you to invest without certain products or services involved.
As a new investor, be wary of scams where people try to use your money to pay off old investors. When the company has reached a point when it can no longer get new recruits or referrals, it will eventually collapse as the company solely depends on the money they are getting from new clients or investors to fund the operation.
5. Approval or recognition from the government
It is essential to know if the company is regulated by the government and ensure they have a permit to operate. In the Philippines, for instance, update yourself about Securities and Exchange Commission (SEC) issued public advisories and warnings about fraudulent investment schemes and companies. In some occasions, it is the Philippine embassy in your part of the world that will issue this written advisory or warning.
It’s important to know whether an investment entity is in good standing and allowed by the government to solicit investments. To avoid being scammed, financial education is a must so you will be more cautious where to put your hard-earned money as an OFW.
Jun Amparo is a personal finance advocate and founder of Richly Blessed Today. He is an OFW currently working as a school counselor in an international school in Thailand. He is currently writing a book on personal finance for OFWs that will soon be available. To learn more about proper money management, please visit his blog www.richlyblessedtoday.com