Beware Of Scams

Recently in Malaysia, one middle age man was lured into a gold investment scheme, where he was promised an incredulous 10% return every hour!  Without a doubt, it turns out to be a scam and he lost MYR 570K (you can watch the news here).  This is a huge sum of money for the average person on the street, and losing it is definitely impactful to one's livelihood, especially if one is near retirement years.  So why did such scams succeed?  Short answer: greed.

As the saying goes, when something is too good to be true, it probably is.  So why are there still pockets of individuals falling into such scams, especially when the returns sound so ridiculously high, which is probably a red flag?  This could probably due to the recent rocketing prices of commodities like gold, bitcoin and cocoa.  For gold, the price has risen by about 12.7% (in SGD terms), and cocoa prices has rocketed by 34.2% in the past one month!

Personally, I did buy physical gold at the start of this year and I shared that in an earlier post.  However, I did it on my own and bought directly from BullionStar.  If one is jittery and uncertain about these various private dealers, one can buy physical gold directly from United Overseas Bank (UOB).  For myself, my intention to buy gold is for long term store of value, thus I commit myself to buying 1 troy ounce of physical gold per year as a form of diversification.  I did not expect price of gold to rise this much in 4 months, but any upside is definitely a pleasant surprise.  However, I have no intention of selling it anytime soon, so the rocketing price will not benefit me in the near term.

So, how can one be more vigilant against such possible scams?

1)     Research the Seller and Verify Their Credentials

Before investing, thoroughly research the seller or company offering the gold.  Check their reputation, reviews, and history of transactions.  Look for any red flags such as negative feedback or complaints from other investors.  Ensure that the seller is licensed and regulated by relevant authorities.  In Malaysia or Singapore, for example, check if they are registered with the Securities Commission or the Monetary Authority of Singapore (MAS).  If doubtful, UOB could be your best option.

2)     Physical vs. Paper Gold

Be cautious of schemes that offer paper gold or digital certificates without physical delivery.  Opt for physical gold or reputable gold-backed ETFs (Exchange-Traded Funds) if you want exposure to gold without holding it physically.

3)     Transparent Pricing

Verify the pricing of gold against market rates.  Scammers may offer gold at significantly lower prices to lure investors.  Use trusted sources like reputable bullion dealers or financial institutions to get accurate pricing information.

4)     Avoid Unrealistic Returns

Be wary of investment opportunities that promise unusually high returns with little risk.  10% returns per hour is definitely a huge red flag for one to stay far far away.  Gold investments typically provide steady returns over time (usually slow as it mainly serves as a store of value rather a speculative play), so be cautious of anything that seems too good to be true.

5)     Read the Fine Print

Carefully read and understand all terms and conditions, especially regarding fees, charges, and redemption processes from the seller.  Ask questions if anything is unclear before committing to the investment.  Whenever in doubt, stay away.  It is always better to miss an opportunity than to lose your life savings.

6)     Seek Professional Advice

Consider consulting with a financial advisor or an expert in gold investments without any personal interests in the deal (not the seller, as never ask a barber if you need a haircut).  They can provide valuable insights and help you make informed decisions based on your financial goals and risk tolerance.

7)     Secure Storage

If you're buying physical gold, ensure that it is stored securely in a reputable and insured facility.  Avoid keeping large amounts of gold at home to minimize the risk of theft or loss.

All in all, always remain vigilant.  Never invest in anything you do not fully understand, especially, never pass your hard-earned monies to individuals you do not know to invest on your behalf.  No one treasures your own monies more than yourself.  Stay safe, stay sane.  Barista FIRE, here I come...!