THE complexity in the financial world has increased and this also requires additional work on the part of the individual investor. One aspect where the investor has to remain ever vigilant relates to frauds that are taking place all around them.
Investors should be extra careful with their investments because there is a chance of losing the hard earned money that they have accumulated. There are several points that an investor should follow.
Given below are a few of them that can help tackle the situation in a better manner.
Curb the greed: One of the first things that an investor needs to do is to curb their greed to generate higher returns. This is actually the starting point for trouble for a lot of people because they get caught in this entire effort to generate a higher return and then are at a loss of how to manage the situation.
The most common way that people fall into a trap is by being promised a rate of return that is so high that it cannot be believed.
In many cases this is also not possible because the entire transaction is a fraud.
So, if there is someone who is offering an assured 25 per cent per annum it should make the investor question how this is possible. Anything that is higher than what is available in the market should be questioned, because there might be some hidden catch.
Keep a check: This is another lesson that investors need to learn because no matter what is the quality of the service being provided there has to be some personal effort.
There should not be a situation where the investor will give all the responsibility to someone else like a relationship manager and let them manage the entire funds without asking any questions.
They will need to make their own checks to see that the right process is being followed and also that the investments are genuine. This will include knowing whether the product that they are investing in actually exists and what are the exact features of such a product.
The reason behind selection of a specific instrument also needs to be known, so that they are able to see the logic in the entire effort.
Don't sign blank documents: This is a very important lesson that every investor must learn from the recent scam involving high net worth individuals. They should not be signing any blank document and giving this to officials of any service providing firm. The risk here is that this can be misused because of the fact that the documents can be used to undertake several transactions from the account of the individual without their knowledge.
There is a big risk when any documents including forms are signed without reading them. The signature signals acceptance of the conditions that are related to the transaction even if the individual has not seen them. At all times the documents and forms should be filled in front of the investor and they should also keep a copy of them, so that they are able to cross-chek what exactly they had signed when required later.
Keep multiple contacts: When it comes to dealing with any institution be it a brokerage house for equity transactions or even a bank there is a need to maintain multiple relationships with the employees, so that the investor knows whom they are dealing with.
In many cases, the only person whom they know is the relationship manager, but this is not enough.
They need to develop contacts with other officials in the banks, brokerage, mutual fund or other entity.
They will also be able to know if they are on the right path because they can always seek the help of someone else in case of need. This also provides an additional layer for protection from a fraud by individuals related to the financial services provider.
