How to spot an investment scam: 5 questions to ask

How do you tell the difference between a genuine investment opportunity and a scam?

As financial pressures mount, many people are desperate to find that quick fix to their money problems or to make their money grow, fast.

Financial scams on the increase: 10 tips to protect yourself

While it may be tempting when you're offered investment opportunities that promise high growth without risk, these will often turn out to be scams, warns personal financial adviser Warren Ingram.

A lot of these fraudulent offers are found online these days, says the Galileo Capital executive director.

"You'll find some finfluencer who'll be telling you about what's almost a secret, like 'this is an investment that only a select few can access and don't go and spread the world to everyone'."

"The other line often used is that 'the system' is rigged against you and the promoter knows how to help you make your money."

Warren Ingram, Executive Director - Galileo Capital

Ingram emphasizes that, very often, these offers are structured in a way that is not regulated.

He shares the questions you need to ask to avoid losing your investment savings.

Five questions to ask, to protect yourself from financial scams:

1. Who is promoting the investment?

Is it being offered only on social media or via a website? Are the promoters registered with the authorities? For example, do they have a financial service provider (FSP) number?

2. How is the investment regulated?

Is the investment listed on the stock exchange, or is it a unit trust or life assurance product? Be wary when promotors tell you that the investment is not regulated and operates outside of 'the system'. They'll use conspiracy theories to tell you they've found a secret way for you to create wealth and that the industry does not want you to know about them because the system is rigged.

3. Does the investment promise high growth and no losses?

It sounds like a dream come true when an investment's promised that can grow by 25% per year or by a few percent per month without any chance of losses. ALL investments that have a chance of beating inflation over time carry risk. Fixed deposits or RSA retail savings bonds might offer good interest rates.

4. How does the promotor get paid?

It is a simple question and should be answered easily.

5. Who are the auditors of the investment?

Do some online research of you own, Ingram urges.

Spend 30 minutes researching the founders, promotors and the name of the investment, is his advice.

"You might find all the information you need to know. If the promotors have been involved in lots of other opportunities before or they've changed their company name many times, that is a really bad sign."

Warren Ingram, Executive Director - Galileo Capital

Scroll up to listen to Ingram's advice in detail