Why people keep falling into the trap of online investment fraud schemes?

 We keep hearing the news about people losing their life savings to fraudulent investment schemes. It is wondering about how again and again people are lured into believe in such fraudulent schemes and lose crores of rupees.  For many of them lessons learnt are too hard as they will never be able to recover from these setbacks during their life time. This is because of lack of personal finance management knowledge / skills, greed and herd mentality of following other without understanding the risks.

While it is unfortunate that we are not taught about personal finance management in our school or colleges but it is also our mistake not to learn about it. After the college, we stop reading and learning about life skills and instead limit our focus to career & businesses. But if we want to excel in life, then we need to have multi disciplinary approach to life and learn variety of skills. There are few life skills one must learn (like personal money management, cooking general medicine etc.) without which life is always struggling. We can see great successful people (like film stars, sportsmen, businessmen, musicians, artists, singer etc) who focus only in one area and limit themselves to that which has resulted in tragic life for many of them like failed marriages, bankruptcy, addictions etc.

This is why people get carried away by easy money schemes. They use our innocence, lack of knowledge and play some mind tricks to make money and leave us high and dry.

For most of the people success won’t come early in life and build wealth bit by bit and still struggle to reach a comfort zone after working for years and many times decades. Along the way we compare others going ahead of us and look for short cuts to reach the goal faster. This is the time when we get attracted by these quick and easy money schemes.

Seeing others getting richer, we also get lured into the high return investment schemes. We invest a small amount to see if it really works that way. And they return the amount with good profit to prove that it is indeed real. Like this every time we get back the money with profit, we get more confidence in this. This is called recency bias. Due to this bias and the overconfidence, we put all our money to it.  And in some cases people become so greedy that they borrow money to invest. We keep getting message, emails and updates in the Apps showing our investment and profit. All this can be just a paper profit meaning just fake numbers. And one day when you want to withdraw your investment money the Apps don’t work. You try to call them the responses will stop. Finally you will end up running to police station to register a complaint.

This is the same story happening again and again. Only the methods have changed over the time. Earlier it was through paper advertisement and now they are using technology and social platforms to lure us. Often it is our mistake that we do not check their credentials and background.

While one can do investments on their own if they really know where and with whom they are investing and what are the risks associated with it and what the benefits you can expect. But it is always wise to find a registered investment adviser for investments.

This blog is written Mr. Vinay B N who is a Chartered Accountant with 15 plus years of experience in managing the wealth for high net-worth individuals and also the founder of WR Ventures which focuses on the digital protection, wealth management, tax planning for individuals and families. You can write to hello@wrventures.in or visit their website at  www.wrventures.in for more information.