Financial Scams & How to Avoid Them
They say “prevention is the best cure” and so it must be true. In these tumultuous times, let’s learn about some of the financial scams so we can -hopefully- avoid them!
1. Phishing
Yes, phishing not fishing! I’m sure that anyone with an email has encountered at least one or two Nigerian princes and princesses who are in need of money. Trust me when I tell you that if a “royal” needs money from you, then they’re not royal by any means! If they want money, they can go to Netflix like normal royals!
But phishing is not just a pool of fake royals, they are emails that look extremely authentic. They always come with a link to a phoney website that once you click on it, you’re doomed! So, make sure to read any email well before you do yourself some damage.
2. Ponzi Scheme
We talked about the Ponzi scheme before, but essentially it’s when any money manager uses “new investments” to pay “returns” to previous investments. You might have heard of the biggest Ponzi scheme of all time which Max Madoff takes all the credit for! His Ponzi scheme lasted for about 20 years and reached about $50 billion! He’s now serving 150 years in Prison. If you want to know more about this long con, check out The Wizard of Lies or Madoff: The Monster of Wall Street.
3. Pyramid Scheme
Not to be confused with its sister-in-crime, a pyramid scheme doesn’t require an investment, but instead, it does require a fee to get returns. There are close similarities with the Ponzi scheme because there are no actual investments, they’re just returns from new investors. When there are no longer new investors, the pyramids come crashing down!
It does seem a little familiar, right?! Avon and Oriflame, anyone?! But, in fact, they’re not pyramid schemes, they run on multi-level marketing (MLM) strategies. MLM strategies focus on selling actual products, unlike pyramid schemes which focus on recruiting people. In most cases, pyramid schemes try to disguise themselves as MLM programs.
4. Pump & dump
Pump and dump is a rumour-based scheme. It’s basically when someone, usually a fraud, spreads a rumour that X stock is all the hype now as a way to create a buying frenzy. This will “pump” the stock price and then the same con artist will then sell or “dump” the shares of the stock at the new inflated price.
So, there you have it! A rundown of some of the sneakiest financial scams lurking out there. It’s wild how creative scammers can get, right? But the good news is, with a little bit of caution and some healthy scepticism, you can keep your money safe and sound. Remember, if it sounds too good to be true, it probably is. The best defence against scammers is being informed and staying sharp. Stay safe, stay savvy, and don’t let the scammers win!