Investment Scam 101: Who Is Vulnerable and How to Avoid Being a Victim

Investment Scam 101: Who Is Vulnerable and How to Avoid Being a Victim

There is no doubt that advanced technology has optimized the convenience of various financial transactions, including investments. But as technology becomes more accessible, investment scammers are also thriving. Swindlers can simply send out legitimate-sounding emails, and wait for an unsuspecting recipient to fall victim.

And a lot of these scammers actually succeed. In the Philippines, 1 in every 100 people fall prey to investment scams that promise high returns within a short period, wiping out over Php25 billion of their hard-earned money.

Other countries, such the U.S. and other first-world nations, aren’t invulnerable to this crime as well. In this article, we’ll find out who’s likely to be victimized, and how to recognize a suspicious deal.

Typical Scam Victims aren’t the People You’re Probably Expecting

You probably expect that senior adults with reduced cognitive functions are the most vulnerable to financial scams. But in reality, it’s to financial abuse that they’re the most vulnerable, not a scam.

The actual likely victims, according to research, are those that lean far from the “old and ignorant” stereotype.

While men in their 70s and up are indeed found to be likely victims, young and acquisitive individuals are easy targets as well. The more willing they are to take risks, the more likely they are to fall for an investment scam. That’s because they tend to regard money and wealth as signs of success.

A key to remember is that if you think you aren’t at risk of being scammed, then you’re at a higher risk of being a victim. Ponder how important money is to you; if you believe that becoming rich is a highly important achievement in life, you may unknowingly be attracting swindlers.

Likely victims are especially enticed by unregulated investments and those that others aren’t familiar with. For example, foreign exchange. This is a high-risk investment that requires the services of a legitimate forex broker. To an eager financial risk taker, however, they may only focus on the prospect of high returns, causing them to approach and trust scammers, instead.

Thus, no matter how earnest you are in making your money grow, be extra careful when browsing your emails and answering unsolicited calls. Scammers target those who have no problems in entertaining a stranger, so set limits and always verify the identities of people introducing themselves as brokers or financial advisors first.

people looking at stuff online

Signs of an Investment Scam

1. Too Good to be True

If a so-called broker approaches you and claims that your $1,000 can earn $500 within a short period, consider that the first sign of a scam. No such scenario is possible in any type of investment.

2. Claims that You’ve Won a Prize

Text and emails stating that you’ve a won a prize, which needs to be “activated” by paying a fee, are blatant scams. Sadly, many people are likely to fall prey to this. In a study involving 211 participants, 48% showed willingness to entertain such claims.

3. New Business Models

A self-proclaimed entrepreneur may approach you and claim that if you invest in their startup, you’ll be part of a groundbreaking innovation that will change how the world works. While that sounds promising in theory, chances are the company doesn’t actually exist.

4. Urgent Payment Requests

Swindlers convince their victims to transfer money immediately by claiming that the “offer” is limited. They won’t give them ample time to consider whether the deal is legitimate or not.

5. An Unregistered Company

Any legitimate broker and investment firm should be registered with government agencies. Otherwise, they’re just criminals taking advantage of your financial goals.

Again, always practice caution when corresponding or speaking with a broker or financial advisor. Research their company and product first, and immediately retreat at the first sign of a fraud.

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