Get Rich Quick Sheme

You want to invest because you’re chasing that dream of achieving financial freedom. However, there are way too many investment options out there. Some are legit, some are not. So, how does one differentiate between the genuine and the scams?

Advice from well-meaning family and friends - Many are sucked into investments scams because a trusted friend or family member told them about it. Unfortunately, in these cases, word of mouth referrals can do more harm than good simply because these scams rely on you to invest solely on blind faith. It’s tricky. If you cross-question them about their investments being a possible scam, they’ll insist it’s not and say, “Of course it’s not a scam, it’s worked for me!”

But still… do your research - Researching a potential investment is a simple process. Simply Google: “investment name” + scam. If something pops up about that particular investment, avoid it like the plague.

Cult-ish - Be wary of job advertisements or investment talks that require you attend a “seminar” to learn more about it. This is the modus operandi – you’ll receive vague emails telling you to present yourself at a particular venue. You’ll ask them what it entails only to receive vague replies in return. You attend out of curiosity only to find that there’s a stage at the end of the room where person after person hops on to tell the audience how a particular product “changed my life forever”. While not all of these are scams, enough of them are – so practise caution before signing up.

Ponzi schemes - Ponzi schemes are investments that work, but are not sustainable in the long run. Only those you join early in the game make money here. These schemes are advertised via family and friends and in many cases, seminars as well. Ponzi schemes promise unrealistic returns. For example: “Get 30% returns on your investment in one month!” What they don’t tell you is that you have to go all out to recruit a string of people – where else would that 30% returns come from?

Multi-Level Marketing (MLMs) - Not all MLMs are Ponzi schemes, but all Ponzi schemes are MLMs. On that point alone, you must tread carefully. The network of people in MLMs are pretty cult-ish too. They’ll tell you it’s easy but it isn’t. They’ll tell you there’s loads of profit to be made but you will have to fork out large amounts of cash upfront to purchase their “starter kits”, then sell products they tell you people definitely need. Bear in mind, every product is overpriced.

Some random, super-niche, time-limited opportunities - One of the weirdest schemes involves selling gullible people suitcases full of money soaked in some mysterious ink. The person offers to sell the millions in useless, ink-soaked cash for a song. The person says all you have to do is buy a “soap” that removes the ink. Once the cash is washed clean (literally), boom, you’re an instant millionaire. Other schemers also sell fodder for cows that can supposedly produce 10 times more milk in the animal than usual, so you get 10 times the profit. What they don’t tell you is that the fodder does not come with government approval and can’t be sold in the open market.

Conclusion - If an investment looks too good to be true, avoid it at all costs. What’s a more realistic return when it comes to investments?

• Low risk at 2-8% per year: Amanah Saham Berhad (ASB), fixed deposits, savings accounts, blue chip stocks

• Medium risk at 0-50% per year: Property (the risk depends on location and luck), normal stocks, exchange traded funds (ETFs). This is a very wide category.

• High risk – unlimited returns every year: Penny stocks, Bitcoin. There is a huge risk as you could very well never see your money again.

• Die: Ponzi schemes, random investments

If any investment promises returns of 10% or more a year, research the heck out of it. The only “safe” investments are low risk investments. If you are interested in medium or high risk investments, only invest what you can afford to lose.

Article by - Suraya - website Ringgit Oh Ringgit.