HOW TO AVOID BEING CHEATED FINANCIALLY

HOW TO AVOID BEING CHEATED FINANCIALLY

  

1. Name of entity

·        Ask for the name of the entity/ issuer whose product you plan to buy.

·        Know the registered operator/broker in whose name your stock trade will be executed.

·        Ensure you have this name for all your papers which you receive as proof of investment.

2. Accountability of entity

·        Know the entity's accountability to regulatory authorities or the government.

·        It is mandatory for them to show you proof of their registration if you ask for it.

3. Regulatory approvals

·        Ask for the document that carries the product's name and proof of a regulator's approval.

·        Do not go by printed pamphlets, advertisements, hand-outs or presentations.

·        Demand a copy of a detailed formal offer that has the name of the entity you have listed.

·        You need to know that its legalese exists and that the scheme is not a concoction.

·        Ignore messages that tell you to invest an amount, earn an assured sum, and save taxes.

4. Utilisation of the money

·        Ask how your money will be used, how it will generate returns and don’t accept generalities.

·        If it is an IPO, ask for the business of the company that is raising the money.

·        If it is a mutual fund, ask where it will invest, whether in equity, debt or gold.

·        If it is a bond of a finance company, write down its main business.

·        You also need to ask how you can find out what happened to the money.

5. Investors’ obligations and returns

·        Ask for all your obligations, like premium periodicity, fee structure and investment options.

·        Ask what you will get, in complete detail, without accepting any assurance from anyone.

·        Ask how often you will know what the market value of your investment is, for evaluation.

·        Make sure you understand the modes of the returns on your investment.

6. Awareness of wrongdoing possibilities

·        Insist on knowing what can go wrong by asking upfront about it from relationship managers.

·        If you are buying an IPO, you need to know its price may be lower than the purchase price.

·        If you are taking a bond, you need to know that the credit rating might change.

·        If you are investing in a mutual fund, you need to know that returns depend on the market.

·        Know what you are looking out for and ask where you will get the information.

·        Make sure you know what happens if you do not pay the premium of a product.

7. Product’s life

·        Ask if you have to stay with the product for any specific period of time, options if your situation changes, penalty charges, prepayment terms, premature withdrawals, loans against your investments, redemption terms, etc.

8. Spotting a ponzi scheme

·        Avoid schemes that have not been registered with the regulators.

·        Avoid the investments that you don’t understand or can’t get complete information.

·        Avoid schemes that continue to generate positive returns regardless of market conditions.

·        Be cautious about any ‘guaranteed returns’ investment opportunity.

·        Ignore excuses about the unavailability of written information on an investment.

·        Read the prospectus for disclosure statement before investing.

·        Be suspicious if you have difficulty in redeeming your investment.

·        Don’t fall for ‘roll over’ promised payments by offering higher returns.