MyMoney Online, Personal Finance with Warren Ingram

How to spot a sophisticated investment scam

pixabay.com

Some investment scams are crude.

Others have an air of legitimacy.

The Money Show’s Bruce Whitfield asked personal finance expert Warren Ingram how to tell if what you’re being offered is truly an amazing investment or merely a scam.

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:

Subscribe to our Business Wrap Newsletter


Recommended

by NEWSROOM AI
Read More
'All South Africans who can, must give. It’s our responsibility and privilege'

'All South Africans who can, must give. It’s our responsibility and privilege'

Bruce Whitfield interviews former Springbok captain Jean de Villiers about his attitude to money and beliefs about it.

Kruger International is buying Standard Bank, Visa and owner of Johnnie Walker

Kruger International is buying Standard Bank, Visa and owner of Johnnie Walker

Kruger International Asset & Wealth Management Director Mia Kruger shares her stock picks of the week on The Money Show.

Worldwide clamour for Faf’s 'SA-flag onderbroekie' sees it sell out in a day

Worldwide clamour for Faf’s 'SA-flag onderbroekie' sees it sell out in a day

“As soon as the images of Faf with Prince Harry went around, things just got crazy!” says Bean Bag The Brand owner Kurt Schmelzer.

Take as much as you can out of South Africa, now! – wealth manager

Take as much as you can out of South Africa, now! – wealth manager

After a "calamitous” mini-budget, Austen Morris Associates does not see a single reason to invest any discretionary funds in SA.

The stock market is not a casino. Investing in shares is nothing like gambling

The stock market is not a casino. Investing in shares is nothing like gambling

Too scared to “gamble” away your hard-earned cash? Kabous le Roux asks you to consider this simple argument with an open mind.

Bryan Habana opens up about money, and now having to buy his own clothes

Bryan Habana opens up about money, and now having to buy his own clothes

Bruce Whitfield interviews the legendary Springbok about his attitude toward money (hopes and fears, successes and failures, etc.)

Popular articles
[VIDEO] Family saved from being hit by speeding SUV goes viral

[VIDEO] Family saved from being hit by speeding SUV goes viral

Khabazela shares tweets and Facebook posts that have gone viral.