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|I am suspicious of all the things that the average people believes.”
― H.L. Mencken
History shows that a lot of people are not learning at other people’s mistakes. We may either blind, financially innocent or not really aware of it. Modern financial engineering is not new anymore. Some of us may be one of the victims of fraud or you know someone who was victimized by a large organization which is insolvent (Not having enough money). Identifying it is just one of the ways how you can prevent yourself from being financially distress. Self- awareness can help you bring the red flags into the light.
1. The products are too good to be true
When someone tells you that the investment product has no risk involve, think again and run away from it. Someone is hiding the fact or keeping the truth from you. Everything has a risk. In every aspect you either gain or lose some of it. When you think about low risk and high gain, does it sounds good? Yes of course, but no one is offering it aside from those scammers. There were many people who took that bite and changed the course of their financial life. Lack of investigations will not resolve the issues.
2. They promise guaranteed returns
Many scammers are selling the end goals but they seldom explain the process and the journey of it. They intentionally hid it from you and presented what you wanted to hear to lure you with the products and services. They always highlight the return with minimal financial sacrifices. Maslow’s hierarchy of needs tells us that we need security in our lives. If we apply it in investments, having a secured return of it will be a more financially sound decision for a lot of people. When a scammer addresses that need it will be a monster disaster when you get in.
3. Be mindful of “The Credible guy”
All fraudsters were credible guys before their skills were exposed publicly. Before Ponzi scheme became a worldwide term he became a financial advisor of Prime Minister Benito Mussiolini. I just want to remind that financial freedom is in your hands so do your own due diligence. You know someone who has credibility but check also their qualifications like their values system. Never stop asking questions until you get the right fit. The fact that they are credible, it should also be verifiable. Most of the time we just trust and give all the money that we have blindly, not knowing the background of that con-artist.
4. Everyone is buying that
Without checking your goals, visions and emotions you will be trapped immediately. The problem about the herd mentality is everyone doing it, so it must be good. Big no! The quick rich scheme mentality will easily gobble you up. The power of social pressure will pull you underneath the surface. Behavioral Finance Expert Daniel Kahneman states,” that driven by emotional reactions such as greed to gain money and fear in losing funds, you normally conform to the desire to be accepted by a group”. As a result, investors were seen joining frantic purchasing of that products resulting in economic crises. Example, the CAP (College Assurance Plan).
5. They pressure you to get the products.
Biggest scam tactic is to let you feel that this is the last ride , limited editions, phase out and the availability of the product will not be visible for the next couple of years. Creating a false sense of urgency by claiming limited supply gives you this impression. Joining the bandwagon is good but be careful. The Budol Budol gang, the Aman futures group used these strategies to lure investors. The famous Ponzi scheme even tried to do this. We use emotion when we buy, but we use logic to defend why we buy things.
6. The Reciprocity Tactic.
Many fraudsters asked investors to attend free seminars while other legal entities are also doing the same thing. Now, how will you know who is telling the truth? This is a tricky part. Offering to do a small favor for you in return for a big favor is a classic example. They give materials, free lunch or dinner. Without you doing some intense research about the company, products, business model and the one selling the services you are at the brink of financial disaster.
These are just red flags but not totally immediate indicators that the company is a scam. Before you invest, be cautious, be aware and investigate.
But those who desire to be rich fall into temptation, into a snare, into many senseless and harmful desires that plunge people into ruin and destruction. 1 Timothy 6:9
David Isaiah Angway is a Financial Evangelist