How not to fall prey to financial scams

As human beings, we generally have a trusting nature and want to believe in the good in our fellow beings. So when we are presented with an amazing financial opportunity, we are eager to jump in with both feet and a lot of hard earned rupees.

Unfortunately, today we often need to be cautious and ask ourselves, 'Is this too good to be true?' If the answer to that question is yes, then it is better to step back and look for investments elsewhere.

Financial scams

The most recent financial scam to rock India is the Rs 400 crore Citibank customer fraud. Unfortunately, with the growing number of high net worth individuals (HNIs) in India, more schemes of these types are sure to follow. One way for Indian investors to protect themselves is to take an active interest in the management of their financial portfolios.

Scams of the above nature are common for Indian investors because they have a tendency to gravitate towards schemes that promise big bucks quick. Remember, as per SEBI laws, no one can offer guarantee on any market-linked product. Any product that can go up quickly can also go down quickly!

So be a smart investor and follow these simple rules:

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Smart rules:

1) Research an investment before putting forth any money.

2) Deal with reputed wealth managers ONLY!

3) Ask for references from your investment advisor or manager. What are their results for both bull and bear markets?

4) Ask yourself what products and investments best work for you. What is your risk profile?

5) Set up a monthly meeting with your wealth manager to go over your investments. Question anything that does not look right to you.

The weakest link

As with most bullies, people who scam usually go for the weakest link. In the case of financial scams, it is often the elderly and people that are already in financial trouble. Don't think you are safe because you don't fall into either of these categories. Anyone can be a victim in financial scams.

So how do you protect yourself and your loved ones from being taken for a ride? By staying informed and in return, informing those you love of current scams. You can save yourself a lot of time, money and heartache by doing a little research in advance. There are many sites, blogs and social networks on which information and feedback on a scheme can be obtained. These sites may be helpful to you to determine if the investment you are looking at is right for you.

Watch out for scams

Below are some key factors in watching out for everyday scams:

1. Pay X amount and you will receive 2X

If you receive a phone call or an e-mail asking for money, more than likely it is a scam.

A couple of common scams that may ask for payment in advance are exceptional home businesses and announcements that you are a lottery winner. Remember, if you have to pay money in advance to make quick bucks in return than someone will be making money, it just won't be you!

2. Bad credit? No Problem! We can fix that!

Beware of companies promising to fix your credit. Especially when they are asking for a fee up front, you can do the same thing they can with a little research and know how. To find out more details go to Consumer Bad Credit Guide (http://www.consumerbadcreditguide.com/creditinindia.html).

3. Smooth talking salesmen (or women)

Before you give money or your precious time to a smooth talker, ask for their licence in advance. If they don't have it, stop the conversation until they can get it to you AND you have a chance to check it out. After they have pitched their idea or product, tell them you need time to think about it, evaluate your financial affairs and talk to your family regarding the deal.

If they give you a hard time about investing or buying right now because the offer won't be available later, thank them for their time and show them to the door!

4. All I need is a few personal details

This scam usually comes in a personal call or via an e-mail, claiming to be from your bank or other legitimate source, saying they need information for a specific reason. If someone contacts you asking for personal information, such as where you live, banking information, other e-mail IDs, pan numbers, etc., don't bite!

Go to the bank or visit your banks online web site to see if they need information from you. Make sure to report any suspicious activity to the appropriate person in your branch office.

If in doubt...

If in doubt, don't do it! The best advice is to follow your gut. If you feel an opportunity is too good to be true, chances are it is. Do the research required to invest your money. In the long term it always pays off.