EXPLAINER: Five ways to spot investment scams and not fall victim

Investors are always willing to make good returns on their investments but most times they unknowingly end up in the hands of fraudsters

Globally, investors are always willing to make good returns on their investments but most times they unknowingly end up in the hands of fraudsters.

There are some investment schemes that are not legitimate and have pushed people to burn their fingers trying to generate additional income. To spot an investment scam, here are five ways.

First, all investment-related organisations must be verified and regulated by the Securities and Exchange Commission (SEC), an agency of government established to regulate the securities markets and protect investors.

Before you carry out any investment deal with a company, check if they are SEC-regulated using this link https://sec.gov.ng/cmos/, if they are missing from the list do not initiate any transaction with them.

Second, when an investment either promises returns of 20 percent or more weekly or monthly or has attached promises of low risks with guaranteed high returns, then it is a red flag. Legitimate investments are not get-rich-quick schemes; hence, they take a bit of time to mature.

Third, if the company does not have a convincing online or offline presence, proper financial documentation, proof of previous successful investments, valid insurance plan and coverage, and has little or no information about them or their activities, that is a warning. Hence, you need to always run background checks and adequate research about the company.

Fourth, if the investment does not have a clear fundamental driver or a clear purpose that will generate returns, for example, when as a potential investor you are told to pay and bring two or more people as downlines; that is a red flag. In addition to this, some investments use farming, real estate, or a new business venture, etc., as camouflage, but do not have proper documentation to support it and tag it as a unique opportunity, do not fall victim to it.

Fifth, if the company or individual offering the investment exerts intense pressure and formulate theories that label people as being scared of becoming rich. Do not succumb to the investment opportunities that place pressure on you, ask you to invest all of your assets, tell you stories that sound too good to be true.