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How to Avoid Possible Investment Scheme Pitfalls

News
15 May 2022
Millions of citizens are struggling to make ends meet, making the prospect of quick profits via an investment scheme more attractive. However, it’s vital to always approach any investment opportunity with a clear and critical mind before signing on the dotted line. 
Investment Scheme

** Originally published in August 2021.

It’s been a bleak time for many South Africans as COVID-19 lockdown restrictions closed down companies, led to the retrenchment of thousands of workers and a dramatic cut in worker salaries.

Millions of citizens are struggling to make ends meet, making the prospect of quick profits via an investment scheme more attractive. However, it’s vital to always approach any investment opportunity with a clear and critical mind before signing on the dotted line. 

  • Always be sceptical. Individuals and organisations often try and make their investment scheme seem more profitable than any other. Be especially wary of higher-than-average interest rates. While a higher return seems promising, it’s important to compare it with the market average.
  • Take your time. Before you agree to paying over a single cent, ask for some time to do research. A legitimate individual or organisation will be more than happy to give you time to think things over. Don’t allow anyone to rush you into making a decision.
  • Research the scheme. A simple online search could save you money. Check out the company’s website and social media profiles, read through various reviews and reach out to individuals on social media to get a better idea of how reliable a scheme is.

** The company or individual’s website is not enough to base a decision on. Some dubious investment websites will show seemingly real trades when they are, in fact, fake.

  • Unsolicited offers should be met with caution. Above-board investment schemes will very rarely reach out to members of the public directly. Approach any direct offers with a decent level of suspicion. If they claim to represent a well-known company, reach out to the company directly to verify the person’s claim.
  • Verify the organisation/individual is registered. In most cases, a person or organisation offering financial services must be registered as a Financial Services Provider (FSP) and be able to provide a licence and registration number when asked.

** How to verify whether a person or organisation is a registered FSP: You can access the Financial Sector Conduct Authority’s (FSCA) Authorised Financial Services Provider database at no cost.

  • Check the books. Before investing in a scheme, you are entitled to go through the scheme’s financial statements. Take your time to go through the various figures, scrutinise the numbers and ask questions. If you don’t know how to interpret financial statements, reach out to someone you trust to help you make sense of the documents.
  • Understand what you’re investing in. Investors are often overwhelmed with industry jargon. Make sure you know exactly how the scheme works and how your money will be invested.

If you suspect an investment scheme is operating wrongfully or illegally, you can report the scheme and its representatives to the FSCA.

Source: FSCA