How to Protect Yourself from Investment Scams
Author Avatar


Investment scams are everywhere these days. It’s sad and ironic when those who try to grow their money end up losing it – or worse still, encounter heavy debt as a result. Some have even taken out loans from the dreaded loan sharks and put their lives (and family) at risk to invest in deceptively profitable deals, only to end up to be victims to elaborate scams!

To help you steer clear of such swindle, we’ve compiled a list of common cons that you need to be aware of, as well as some tips on how you can protect yourself against them:

How to Protect Yourself from Investment Scams

Extreme High-Interest Loans

If you are invited to help out with a loan that is going to repay handsomely with absurd interests – like 60% or twice your principal amount – it is very likely a scam. You may hear about it from friends or relatives, but do recognize that this is exactly why others often get taken in, because they trust the source. Often times, these well-meaning folks are unwitting victims themselves.

If you want to extend financial help to someone in need, make sure it’s someone you know intimately, and be prepared to never see the sum again. That is the actual risk when you give a friendly loan.

Real-Life Case: Three people including a Datuk were involved in a scam to borrow money to fund a government project. Lenders were promised returns of 30% to 90%, but their RM176 million-scam was foiled when victims came forward and lodged police reports.

Fake Investment Platforms

Lots of people dream of quickly striking a windfall when playing the stocks – but very few actually do in the short term. Warren Buffet, the investment savant, has said time and again that investing is for the long-haul. Expecting extremely high returns very quickly is akin to gambling because no one can accurately predict the risks associated with the stock market.

If you have been offered hot stock tips from an unsolicited source that guarantees a high payout, it’s likely a scam. Look out also for rogue traders who aren’t licensed to make stock trades. The Securities Commission (SC) regularly updates a list of unauthorised dealers that you should check before you invest.

Real-Life Case: A couple offered financial consultancy services on social media, promising returns of 50% to 80% and conned their clients out of RM20 million in an investment scam.

Read also: Could Watches Be A Smart Investment?

“Business Opportunity” Scams

You’ve most likely had the experience of friends, colleagues, and even relatives approaching you with an amazing business opportunity that will yield high returns when you invest. While some may have been genuine, the risks of losing your money to unscrupulous deals are often a possibility.

As with most of these “deals”, easy money from ultra-high returns is often a scam but even if the deal seems sensible; do not part with your money until you are able to verify its authenticity.

Real-Life Case: A man was allegedly cheated into leasing non-existent hotel rooms in Mecca and was promised profits of 360% a year. The victim had deposited some RM320, 000 into the scammers personal account and is among many others who have fallen victim to the con.

Forex Trading Scheme

Trading foreign currencies sounds super sexy and lucrative, but if you are investing with unlicensed brokers, you could very well lose that investment. Forex trading is a rather risky scheme of currency trading that involves quite a bit of speculation. Even for the licensed traders (which are commercial, Islamic, investment, and international Islamic banks), it’s very difficult to predict the rise and fall of currencies. This is because the factors that influence rates extend globally.

Just to be clear, those who are not licensed (such as an onshore bank) and without the approval of the central bank is not allowed to trade in foreign currencies. If you are intending on investing with overseas companies, be sure to check with the individual country’s regulatory agencies on the legitimacy of the brokers.

Real-life case: A woman lost RM30, 000 in a forex scheme where the trader was a family friend. She was promised lucrative returns and was asked to deposit funds to the trader’s personal account. She found out later that the company that was supposedly trading her funds was recorded on the SC’s list of unauthorised traders.

Protect Yourself and Recognize the Signs

What most of these scams have in common is that they offer unusually high returns in a short span of time, but there are also other red flags of which you need to be aware of.

For instance, these con-artists may pressure their targets to invest quickly, incessantly call or email, refuse to explain the ‘highly complex’ products’, and avoid proper paperwork. All these are tell-tale signs that indicate a potential scam at work.

Follow these tips to protect yourself from the perils of investment scams:

Don’t respond to unsolicited calls or emails offering investment options.
Verify the validity of investment opportunities via the Securities Commission of Malaysia, Bank Negara Malaysia, and the Companies Commission of Malaysia.
Independently research the information you are given and seek appropriate licenses.
Hire a lawyer or certified financial consultant (when dealing with large amounts of money).
Ask for a prospectus for investment products.

If you are looking for a safer way to grow your money, why not save in a high-interest Fixed Deposit account? Do check out our comparison page to find an account with the most attractive rates and terms!


0 0 votes
Article Rating


Comments (0)

Notify of

Inline Feedbacks
View all comments
Top Debt Management Articles
Post Image
Things You Didn’t Know Can Help Reduce Your Credit Card Payment
Desiree Nair
- 14th March 2017
We’ve got a few ideas up our sleeves to help you bring down that bill and possibly even make future payments much more affordable!
Post Image
Tips to Help You Pay Off Your PTPTN Student Loan
Heeral Bhatt
- 25th January 2019
Graduated but piled up with PTPTN debt? Here are a few tips to manage the repayment of your student loan effectively.
Post Image
Cash Advance on Your Credit Card? Here’s What You Need to Know.
Diana Chai
- 5th July 2019
There are days when you need cash on the double and most (if not all) credit cards have this option. But before you run to your ATM; here are some things to think about.
Post Image
Best Balance Transfer Plans In Malaysia (June 2022)
Alex Cheong Pui Yin
- 10th June 2022
(Article updated on 10 June 2022.) Even during regular days, credit card balance transfer programmes are a good […]

Related articles

Related Posts Image
Related Posts Image
Related Posts Image
Related Posts Image