If there’s one thing any financial expert worth his salt will advise you – It would be to ensure that you research, research and research some more before you make any financial decisions in your life.
For instance, if there’s a credit card being offered with a lot of freebies, ask why. What’s the catch? Or if there’s a loan being given at a very low rate, question what made you so lucky. Find out what the fine print hidden in the bottom of the form reveals. But most importantly, if there’s an investment scheme offering returns that are too-good-to-be-true, it’s probably a scam.
In one such scam that was revealed last year, close to 7,000 UAE residents were left financially and emotionally devastated. In a Ponzi investment scheme, Exential Group based in Dubai Media city had investors put in a minimum of AED 91,500 into forex accounts. Profits of up to 120 percent were promised, but the model was untenable and soon fell flat. Numerous complaints were lodged with the Dubai Economic Department, leading to the shutting down of the company and legal charges being filed against its promoters. But while the law takes its due course, the investors report their lives being ruined. For some, this was supposed to help them create a retirement fund. For others, it was their child’s college money being flushed down the drain. And then there were those who had no resources left for a medical emergency.
Reports also show that even as the cases against Exential Group are being heard, new investment scams are being unearthed in the UAE.
[Related: What’s your investment style?]
So how do you avoid becoming the next victim? Watch every scheme with a very skeptical eye – If the promised returns sound too good to be true, they probably are! Only after you have asked a million questions and found the answer to each one of them should you commit a single dirham of your hard earned money. Below are some ways you can try, to identify and avoid investment fraud:
As mentioned before, research is key. Find out all you can about the investment. Where is your money going, how are the returns being earned, who is the promoter, what’s their background and qualifications – these are just the basic questions you can start with.
Know the types of frauds
Keep yourself updated with the latest news and the types of investment scams going around. From Ponzi schemes like the one mentioned above, to affinity fraud, pump and dump schemes, pre-IPO scams – there are plenty of ways to trap the innocent investor.
Don’t succumb to pressure
Are all of your friends investing into something? Think about whether you are really interested in the product. If a sales presentation focuses on how many others have bought the product, this could be a red flag. Another type of pressure could be to pay right away. Is it being posed as a “once-in-a-lifetime offer”, which will be gone tomorrow? Resist the pressure to invest quickly and take the time you need to investigate before parting with your money.
Protect yourself online
Fraud via social media, unsolicited pitches through email and sponsored online newsletters are some ways to rope you into a scam.
Follow your gut instinct
Something feel off about the plan? Even if you can’t put your finger on to what troubles you about the product specifically, trust your gut instinct and stay away from it.