Trap 2. ‘This Scheme Will Make You Rich Quickly’

It’s a universal truth: everyone wants to make a quick buck, which is what makes get-rich-quick schemes so attractive. Such schemes are classic traps designed to lure individuals with the promise of rapid and substantial financial gains with little to no effort. These schemes often involve speculative investments, pyramid schemes, or other fraudulent activities. The reality is that building wealth, typically, requires time, effort, patience, and sound financial planning.

These quick-rich schemes, however, often exploit emotions like greed and urgency, pressuring you to invest immediately without doing proper due diligence. The most legitimate investment opportunities involve some level of risk and require time to mature.

According to Naresh Bulchandani, CFA and head of products, Merisis Wealth, a wealth management company, one should view with skepticism when the high-growth investment opportunity downplays the holding period, underplays the risk, and promises higher liquidity than what has been experienced historically. Consider it a red flag if one of more of the above scenarios are true, because then there is a high probability that it is a get-quick-rich scheme designed to defraud.

There are some other common indicators that can help you identify such schemes. One, liberal usage of terms like “guarantee” and “assurance” when there’s no legal document supporting such claims. Two, when you can’t find who the guarantors are or when the identity of the issuer or sponsor of the investment is unclear, or when the individual or entity is unlicensed. Three, when the returns are too good to be true (see What You Need To Check to find out the typical range of returns observed historically in various asset classes). Four, when there is a sense of urgency through limited period offers (get more details in the next part).

To avoid falling victim to such frauds, conduct thorough research, seek advice from trusted financial advisors, and be wary of high-pressure sales tactics or promises of extraordinary returns.