How to spot a sophisticated investment scam
Some investment scams are crude.
Others have an air of legitimacy.
If it’s too good to be true… (you know the rest)
An investment in shares is the most lucrative one you can make over the long-term. For the last 114 years, the South African stock market gave you up to 15% a year. So, you need to ask some serious questions if anything guarantees you more than that.Warren Ingram, Personal Financial Advisor - Galileo Capital
How on earth can anything give you a linear return that’s way more than what the market offers? If they do then you’re taking way more risk than you think to secure that guaranteed return. Prepare to lose money.Warren Ingram, Personal Financial Advisor - Galileo Capital
3 warning signs that it’s a scam:
Exclusive investments (i.e. offered to only a few people)
Any pitch that creates urgency (e.g. “For a limited time only!” or “Invest now before it’s too late!”)
Any investment that’s not regulated with the Financial Services Board (you need to see the proof)
Ingram warned against the five most prevalent investment scams:
1. Off the book deals
If it’s off the books it’s almost certainly a scam.
2. Ponzi schemes
Money from new investors provides returns for earlier investors.
3. Affinity fraud
Fraudsters dupe esteemed members of society with an “investment” opportunity, leading others to be less critical than they would otherwise have been.
4. Unlicensed individuals selling securities
If the broker is not licenced; don’t deal with him.
5. Pump and dump schemes
Investors with inside information buy a share, then recommend it to others, resulting in the share price rising.
Once the price goes up, they dump their stock, sending the price down.
For more detail, listen to the interview in the audio below.
Enjoy The Money Show, but miss it sometimes?
Get the best bits emailed to you daily, right after it ends:
Bruce Whitfield interviews senior Karatbars representatives, a financial advisor and someone who was invited to its conference.Read More
Nadir Thokan (Co-Chief Investment Officer at 27Four) shares his stock picks of the week with Bruce Whitfield on The Money Show.Read More
Kruger International Asset & Wealth Management Director Mia Kruger shares her stock picks of the week on The Money Show.Read More
Most personal finance advisors suggest reducing “risk” a year or two before retirement. Ignore them, reckons Warren Ingram.Read More
After a "calamitous” mini-budget, Austen Morris Associates does not see a single reason to invest any discretionary funds in SA.Read More
Rowan Williams shares his stock picks of the week with Bruce Whitfield on The Money Show.Read More
Personal finance expert Warren Ingram on how to determine your “financial freedom number”. There's a simple formula.Read More
Portfolio Manager Byron Lotter shares his stock picks of the week with Bruce Whitfield on The Money Show.Read More
Personal finance expert Warren Ingram warns that divorce almost always destroys wealth. Here’s how to not lose your money.Read More
Saving money on boring stuff such as a car can allow you to do really outrageous and courageous stuff, says Sam Beckbessinger.Read More