This year, the Financial Literacy Week by RBI focuses on “Consumer Rights” to educate consumers about the crimes by investment fraudsters and how they should always be on a lookout to never fall into such schemes.
Thinking about securing your future always tends to aim at an understanding spree about investments. Sometimes though, we come across hard-to-believe schemes in the name of banks associated with it. Here’s a quick tip: Do not fall prey to these kinds of activities. Understanding investment plans are realizing that higher the returns, higher would be the risks- that is the principle. But one needs to grasp that higher returns may come with higher risks but higher risks might not necessarily always come up with higher returns. You must understand that it’s the market time you enter and not your timing in the market.
Before understanding the fruitful returns, be wary of the sources you plan on investing in or with. Investment frauds generally pose as a wide range of deceptive practices used by scammers to entice investors into making blind investing decisions. Given the game-changing ways of fraud each day, investment frauds generally follow one or all traits listed as below:
High ‘guaranteed’ returns-
Let’s face it, the principle says “higher the returns, higher are the risks”, but even then is no guarantee to it. So, if a scheme claims to guarantee your returns portion- do not engage further with it.
High initial investment-
This is like a “Ponzi” scheme. Here, investors are lured to invest large sums of money because the returns received are chunks of their own money as there is no other source of income.
Vague/complicated investment strategy-
At all times, financial experts always advise on investing in schemes that you understand properly, in and out. Now, when a representative approaches you with a scheme that you try to understand better and in return get a more complex version of it- you are probably talking to a con man.
Unsustainable business model-
A company promising you ‘incredibly’ high returns should ideally have a sound business model with proper affiliations. If the story sounds odd or fake to you- simply walk away.
Being generous by paying back of losses-
When a representative says that he/she shall pay any losses if incurred from their own pocket- you definitely should run towards the door.
So, what can you do?
Ask for proper regulatory approvals
A registered company will never give an entity permission to mobilize public money. It needs approval from either Sebi or RBI.
Do your own research of the company and the scheme
Do not hesitate to ask one of your trusted financial consultants, consult your friends and search on the internet about the company and the scheme for any consumer reviews. If you are in doubt, better to avoid.
Do not issue cheques in the name of a third party
Always issue payments in the name of a bank or an institution and not towards any individual or third party. Also, remember never to issue blank cheques or sign on blank papers.
Ask for regular account statements
A genuine investment scheme will always provide account statements at regular intervals, either monthly, quarterly, half-yearly or annually. If it isn’t doing so, something might be wrong.
Match performance with stated investment strategy
The performance of your invested scheme must be in line with the returns promised. If not, investigate and if needed, take necessary action by reporting the case.
Now that you know, be alert of the frauds that claim fast money with your hard earned income. Share this knowledge with others and let’s unite with RBI to spread financial literacy this Financial Literacy Week 2018.