How to Avoid Scams in Your Investments?

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Prevent Yourself from Being Scammed in Investments


Investments and financial independence go hand in hand. Start your financial journey off right by investing your money in a growing environment. Well-known investment options that can increase your fund value through interest include mutual funds, UITFs, and VULs. Financial experts confirm that investing is a low-risk course of action.


Protecting your finances has a downside, and that is being a victim of investment fraud. The number of people looking for ways to raise their hard-earned money has led to an exponential rise in investment scams in the Philippines.

Mins to Read: 13  minutes

Age: 18-60 years old

William Bernstein Article Quotes-diarynigracia


New investors are readily scammed by schemes that pose as simple investments with assured profits. This article will teach you how to recognize scams and stay away from them.


Investment Scam: What is it?

When someone tries to con you into investing money, that is an investment scam/fraud. It involves guarantees of large rewards, quick cash, or high profits. Always be wary of investment possibilities that offer a high return with little to no risk since they almost certainly include fraud. If something seems too good to be true, it probably is. They may encourage you to invest in securities such as stocks, bonds, notes, commodities, money, or even real estate. Scammers might tell you lies or give false information regarding a legitimate investment. Alternatively, they can invent a wrong investment opportunity.


Scammers who deal in investments may pose as telemarketers or financial consultants. They exude charm, intelligence, and friendliness. Also, they can claim that you need to act quickly on a business opportunity. They work to gain your confidence to obtain your quick and uncomplicated payment.


How Do Investment Scams Work?

Three basic categories of investment scams exist:


  • The investment proposal is a total hoax.
  • Although the investment is confirmed, the money you provide the scammer does not go toward it.
  • The scammer claims to speak for a reputable company, but they are lying.


In any event, the money you ‘invest’ is directly deposited into the scammer’s bank account and is not used for actual investments. If your money is given to international scammers, it isn’t easy to get it back.


Every scam is unique, and anyone might fall victim to one. Scams can appear natural at the time and are frequently very difficult to detect. Scammers can imitate reputable businesses by using applications and websites with a professional appearance.


How to Avoid Investment Scams?

There are many fraudulent schemes, from small-scale theft to devastating losses. Many people are susceptible to being seduced by the promises of greater rewards and falling for these dishonest scams.


Here are some common indicators that you’re dealing with scams so you can safeguard your finances:

1.     Pose inquiries.

Scammers rely on you not doing your research before investing. Please do your digging to fend them off. Requesting additional details or references is insufficient since scammers have no motivation to enlighten you. Spend some time conducting independent research on your own. See Ask Questions for further information.


2.     Before you invest, do some research.

Never base your investing choices on unsolicited emails, message board posts, or company press announcements. Before investing, comprehend the business’s nature and the organization’s offerings. Search the EDGAR filing system of the SEC for the company’s financial statements. Additionally, you can look for several investments by Googling EDGAR.


3.     Understand the salesperson.

Even if you already know the individual socially, take the time to research the person promoting the investment before you invest. Always check to see if the salespeople are authorized to offer securities in your state and if they or their companies have ever encountered problems with authorities or other investors. Using the SEC’s and FINRA’s web databases, you can look up brokers’ and advisors’ disciplinary records without cost. Your state’s securities authority might have more details.


4.     Be skeptical of unsolicited proposals.

Be particularly cautious if you receive an unsolicited pitch from investing in a firm or seeing it lauded online. Still, it cannot obtain its recent financial data from unbiased sources. A “pump and dump” scheme might be involved. If someone suggests making overseas or “off-shore” investments, be cautious. It is more challenging to determine what went wrong and locate money sent abroad if something goes wrong.


5.     Ensure your online safety.

Sites for social and online marketing present a plethora of opportunities for scammers. Visit Protect Your Social Media Accounts for advice on internet safety.


6.     Understand what to look for.

Learn about the many types of fraud and the warning signs of investment fraud.


Types of Investors

1.     The Passive Investor

Passive investors, also known as low-maintenance investors, frequently lack the time in their day to keep track of their investments. They want to own a little bit of everything since they are savvy investors. Instead of staying ahead of the curve, they aim to match the market.


Said, passive investors maintain active portfolio management while avoiding an emotional investment. They understand risk management well and will most likely stick with conventional investments.


Long-term investors who hold their assets. They commit money up front and engage in little market activity. They frequently invest in stocks, mutual funds, and other passive equity-based products. With these investments, you get a share of the company and receive dividend payments.


2.     The Active Investor

Active investors are always aware of the most recent financial news, as their moniker suggests. They frequently act first, investing in the most current investment plans. This kind of investor enjoys getting involved in all facets of the investment process.


They watch the stock market closely, are avid day traders, and even have an investing accounts with online brokerages. They become emotionally committed to their financial path due to their hands-on attitude.


Active investors are picky, value complete investing control, and aim to outperform the market. You must continuously buy and sell to be an active investor. Investments are closely watched and exchanged at the right price.


3.     The Automatic Investor

The third sort of investor is the automatic investor, who prefers to abdicate responsibility for the investment process entirely. They lack the time and resources to monitor their investments. Additionally, they would prefer to delegate the work to a group of experts and then set it and forget it.


They prefer to have a little bit of everything, and when making financial decisions, they go to professionals. Also, they frequently invest in savings accounts, mutual funds, and target-date funds. They might also own a few equities that offer dividends—preferring to invest in a strategy or plan.


What are the Common Investment Scams?

1.     Affinity Fraud:

Scammers attempt to deceive members of a group that has come together because of a shared trait, such as age, ethnicity, or religion. To gain the group leader’s and its members’ trust, scammers pose as group members. The scammers believe that other members will follow suit if the group leader invests.

2.     High-Yield Investment Programs:

Scammers promise that you investments will yield high returns if you invest with them. They claim that you will profit from your investment. Frequently, these investments are fraudulent or are sales of worthless equities.

3.     Pyramid Schemes:

Scammers will claim that a modest investment might result in a substantial return or profit. But you also located other investors. Your “profit” is basically just the money that other investors paid you. When the scammers run out of new investors or steal all the money and flee, the scheme fails.

4.     Ponzi Schemes:

A scammer, typically a portfolio manager, promises to invest your money and make you a significant profit. However, the money you receive is basically just what other investors paid. When the scammers are unable to locate new investors willing to lend them money, the operation collapses.

5.     Pump and Dump:

Scammers purchase inexpensive stocks and misrepresent their value to prospective buyers in order to drive up the price of the stocks. You can decide to pay more for the stocks because you believe they are a wise investment. The stock price declines after the scammer sell it off at a higher price, leaving you with worthless stocks.

6.     Recovery Room Schemes:

Scammers claim they can assist you in recovering money you’ve lost to other investment schemes, but they demand payment upfront. They don’t do anything after you pay them.

7.     Unsuitable Financial Products:

A financial advisor could try to offer you a product that brings in a lot of money but is not a wise investment. The money you were promised to get from financial products like annuities may not be available for a very long time. In addition, there can be a hefty cost associated with money withdrawals. Generally speaking, some financial advisors might charge you for products or services you didn’t request.


Signs it may be a Fraud or a Scam

  • The promise of minimal risk and substantial reward: Always remember that if an offer appears too good to be true, it probably is. A red flag is when “guaranteed returns” are offered.
  • Unexpected contact: You get a call, email, or post on social media from someone providing unsolicited investment advice.
  • High-pressure techniques: You receive numerous calls and are advised to invest immediately or risk missing out.
  • Less security in cryptocurrency: Keep just the money safeguards for cryptocurrency investments, and scammers are aware of this.
  • Someone you don’t know offers investment advice: Never take investment advice from someone you meet online or through a dating app if they are someone you haven’t met in person.
  • Use of photos or endorsements from famous people: These are frequently bogus. Celebrities seldom ever reveal their financial plans or investments to the public.
  • Someone is using convincing advertisements or websites: If prospectuses, for example, are not registered with ASIC, they are probably a part of a hoax.
  • Scammers request that you deposit money into separate accounts for each transaction: Scammers may cite security concerns or the fact that they are a multinational business as justifications.



How to Determine a Philippine Investment Company’s Legal Status?

You should approach investing with much thought, research, and prudence, just like you would when making a significant purchase that costs a significant sum. The SEC advises everyone to consider, consider, and research each investment proposal before committing any money.


Protecting your possessions or money should be your first thought. To avoid overthinking an investment opportunity, try not to calculate your expected income when you see it advertised online, in the newspaper, or on a flier. Ask yourself instead if you can recommend the person making the investment offer. And what is your knowledge of this investment firm?


Investigate the validity and reputation of the person or business offering the investment opportunity. Check out their LinkedIn accounts online. Keep an eye out for any favorable or unfavorable news concerning the business offering you the opportunity. By performing a little background research, you may arm yourself with knowledge and guard against falling for these scam investments.


Do you want to determine whether a Philippine company is registered with the SEC? Be careful first to gather the following crucial information:


  • The company name and the name of the individual making the investment offer
  • Their address (both the individuals and the businesses)
  • Telephone number (not the mobile number)
  • Registration with the SEC as an investment taker


Don’t give them your money if they are unable to provide you with this information readily. Visit the SEC website to research and validate the business. According to SEC regulations, it must be on the list of businesses permitted to provide investments.


Please be aware that registering with the SEC does not give you the right to offer financial instruments such as stocks, bonds, commercial papers, or other similar investment vehicles. To sell assets to more than 19 investors, only investment firms and finance companies with a QB (quasi-banking) license and SEC-registered securities may make such an offer. Additionally, only brokers, dealers, and salespeople who are SEC-registered may make public offers or sales of SEC-registered securities.


Ensure the company has the required license to sell investment instruments if it claims to be SEC-registered. Please become familiar with their investor base, rate of return, and minimum placement.


Call the SEC Corporate Governance and Finance Department at these numbers for more details:


  • (0926) 017-0248
  • (02) 8818-5476 / 9227 / 5952 / 7264


You may also call the Markets and Securities Regulation Department at (0916) 383-8633.


Where Can You Report Investment Scams?

There are so many investment scams that, at first glance, may appear and sound legitimate. But if you look closer, you’ll see that it’s just a robbery waiting to happen.


You can contact the Enforcement and Investor Protection Department of the SEC at the following numbers/email if you want to report a corporation that is engaged in a scam:


Enforcement and Investor Protection Department
Filing or referral of complaints on alleged scams and other fraudulent activities, Cease and Desist orders, Revocation Proceedings 0961-519-7829







(loc. 208 and 280)

Complaints or referral of cases for investigation 8818-6047



Complaints or referral of cases involving violations of any rule of an Exchange, registered securities association, clearing agency; fraudulent transactions involving listed companies, market manipulation, insider trading in connection with purchase or sale of securities 8818-1898
Special Hearing Panel 0961-519-7829


8818-0921 (loc. 274)

Mandatory Disclosure Forms; Beneficial Ownership Information; Compliance with Anti-Money Laundering Act requirements; AIRDF; MTPP; Complaints or referral of cases involving solicitations by unregistered NPOs, money laundering and terrorist financing activities 8818-5717
International Affairs and Protocol Division 8818-5717

8818-0921 (loc. 316)



Understanding that money doesn’t magically rise overnight is crucial for your financial success. Contrary to what the scammers promise, there is no quick way to double your money. By giving the investment firms you’re dealing with some thought, scrutiny, and research, you can avoid falling victim to investment scams in the Philippines. Keep in mind that controlling your financial responsibilities, financial capacity, and associated risks is the key to successful investing.



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