03 Aug

What better time to engage in a topic such as this as the recent scam that hit West Bengal is still fresh in our memories? How chit fund schemes cheat you and run away with your hard earned money. This is nothing but fooling you with a promise to double your money in a very short time.

 But why do we often go wrong with our investments? The primary reason is our greed to go after high returns without doing the due diligence. Financial scams are not new and chances of them cropping up in the future cannot be ruled out. The question, however, is: What can be done to reduce our chances of getting hit by these scams? 

In next few months you will see good number so financial schemes going bust and you will be left in lurch. These ponzi schemes are run by all sorts of people. Frauds, political cons, small time traders and fly by night operators.

So what are you supposed to do on your part before parting with you money in such schemes?

Following Due Diligiance is REQUIRED:

Background checks

Check the background of the promoters and see how long they have been in the business.

Track records

See the past track record of the company related to delivering the promised return.


Check with some of the people who have benefitted from the scheme in last few years but don’t talk to those who are recommended by the company. They might be agents or dummy investors.

Grievance Redressal

Whom do you need to approach in case of  a fraud in these scenario, which are the authorities whom you can reach or complain


Higher the risk, higher the return. This is the core understanding of financial investments. While secure investments, such as bank fixed deposits, offer steady returns, these are lower than these from riskier asset classes, such as stocks. However, the appetite for taking risk in investments also varies across individuals. Before you go ahead with your investment plan, you should know of the risks involved and invest accordingly. This does not mean that if you are risk-averse you stick only to debt instruments. There is, at times, merit in exposing some part of your portfolio to growth assets. The risk of inflation eating into your portfolio is very high if you maintain a conservative approach to your investment strategy.

Be wary of very high returns. The moment we come across an investment scheme offering very high returns (typically against the trend of the market), more often than not, we see the merit of investing in it. In fact, very few of us do the due diligence before making any kind of investment. When faced with a scheme offering very high returns, such as in the recent Saradha chit fund scam case, instead of getting swept up by the marketing spiel, be cautious and find out more about the scheme. Ask questions such as how the company will be able to give you such high returns. See the track record of the company. Check if it delivered returns as promised in the past. More importantly, check how long the company has been in business.

Money takes time to grow. Remember, investments in the formal finance sector, whatever risk they carry, takes time to grow. Therefore, if you come across a scheme that boasts of giving you very high returns in a very short period, we suggest you stay away from such schemes. Chances are high, as witnessed in the past, that they will be unregulated and if you put your hard-earned money into such investments, there is often no possibility of you getting back your money if things go wrong. While it is true that we want our money to grow by leaps and bounds, it is also true that taking short cuts can hurt pretty bad. Hence, for your money to grow, not only will you have to do the due diligence, but you will also need to be patient and give it time.

Like it is said, there’s no short cut to success, there is also no shortcut to increasing your wealth. You will need to do your homework, stick to formal finance and give it time to grow. 


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Posted by on August 3, 2013 in Uncategorized


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