5 Financial Scams You Must Avoid at All Costs


Have you heard of the phrase “There is nothing like a free lunch” ? A simple yet extremely important phrase that we should all be aware of. We are all programmed for desiring optimum outcome, meaning maximum outcome with least effort. Even better, we all love free lunches.

In reality nothing is free in today’s world, it comes with a price. Despite this, a number of us still fall prey to financial scams. Why? The rude answer is Greed. To be greedy is not bad per se, but being unrealistically greedy can bring about a person’s downfall. Therefore we would like to highlight for you some common scams that you must avoid:

Scam 1: Send Me $100, I Will Send You $1 Million!

financial scams avoid


This is commonly referred as the 419 scam which originated from West Africa. You would receive an email from a person claiming to be a Prince/King/Heir who needs a small amount of money in order to transfer $1 Million back to you.

As crazy as this sounds, there have been gullible people who have fallen for this. This e-mail has been sent to millions by the scammer. Needless to say, those who have sent $100 never saw their money again.

Scam 2: Hey I Am Stranded, Send Me Some Money

financial scams avoid


This is an incredibly notorious scam that can con most of us. A colleague of mine received an e-mail from his best friend that he was stranded on his honeymoon without any money at all. This was corroborated by the fact that his friend was actually on a honeymoon. All good so far isn’t it? Won’t you send some money straightaway to the bank details provided to save your friend?

But, when my colleague called his friend’s mother, he realized someone was trying to scam him. His friend was actually safe, having no knowledge about this. So what had happened? His friend had updated his FB status saying he was away on his honeymoon. It was a public profile, which the scammer used to his advantage. The scammer sent an email to all his friends claiming he was stranded! Imagine how many of the friends got conned.

Scam 3: SMS Stock Tips

financial scams avoid


I get an SMS every day, “Buy the stock of ABC Ltd, sure shot doubling of price”. Such a blatant lie that is being sent as a blanket SMS.

These folks want you to buy the stock so that they can either

a.) Pump up the price and sell later or

b.) Extract money from you later after a couple of successful calls. Most probably the stock price is manipulated by the service provider himself. Never buy stocks on ‘hot tips’. Do due diligence instead.

Scam 4: Promising Very High Returns on Mutual Funds/Insurance

financial scams avoid


I am afraid some big banks are a part of the scam. The banks employ agents to sell insurance and mutual fund policies to customers like you and me. The agents get paid on the number of policies they sell. Obviously they are indirectly forced to mislead customers to make more money.

The agents promise customers extraordinary returns of over 30% per year, which ropes in many customers. Please remember, nobody can promise you any return more than 10%-12% per annum. If they do get more, it’s a bonus. Your investment advisor should offer your investment advice tailored to your needs and after revealing all market realities.

Scam 5: Multi-Level Marketing- The Lure to Get Rich Quickly

financial scams avoid


I don’t want to take names here but some of you may already be aware of these companies. You can see their promoters in coffee shops, restaurants, pubs etc. Your immediate friend/colleague might talk to you about this. They might want you to buy a product and be a part of a network marketing business. In turn, you will have to identify another buyer and a partner thus building a chain.

The people who your friend/colleague will ask you to speak to would be an ultra-rich successful person who had made it to the top of the pyramid. They will claim that they earn money without any work. Don’t buy this. Even if it is true it will take forever for you at the lowest part of the pyramid to make money. In the process, you may also lose credibility with your friends and colleagues as you constantly peddle goods to them.

Final Word: Greed at a Price

We all want to make money, agreed. But at what cost? One needs to be realistic when it comes to the returns. Do not fall for too good to be true claims. Let’s not make the mistake of falling prey to these criminals who scoot with our hard-earned money.

Arjun Balakrishnan is an investment fanatic who loves writing about investment topics. He regularly writes at Investment Gyaan.