Five signs you’re being scammed

The five tell-tale signs

Firstly, they offer exaggerated and above-market returns within a short period of time, with the promise of little to no risk.

There are two golden rules when it comes to investing. The first is that it takes time to make money. Amassing a small fortune within a short space of time should raise questions about the scheme.

The second rule is: the higher the risk, the higher the return. In other words, no investment is risk free or can guarantee significant returns. There is always some risk involved. An investment that promises substantial returns tends to be quite risky, which repels most people with a low appetite for risk.

Secondly, new members are constantly recruited to join the scheme.

Typically, such schemes are sustained by relying on the investments of new members to pay existing members. Once the number of existing members exceeds new members, the scheme goes “belly-up”. At best you lose out on the returns you were promised. At worst you lose all the money you’ve invested.

When the scheme collapses, it is almost impossible to recover the money you’ve lost because you’ve technically given it to a stranger (remember, the definition of financial fraud encompasses the misrepresentation of identity).

Thirdly, there is urgency to join the scheme and no clarity on how the scheme works.

This is a classic characteristic of a “get-rich-quick” scheme. There is usually no clear answer about the nature of the scheme, what it invests in, how it generates its returns or the credentials of the organisation.

Legitimate investments are transparent and can provide investors with all the information they need to help them decide whether to invest. Unsurprisingly, a proper check of “get-rich-quick” schemes will unmask their fraudulent nature. This is why there’s always the urgency and coercion to make an immediate financial commitment under the guise of missing a once-in-a-lifetime opportunity to get rich.

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