Build Wealth: Protect Yourself from Scams

Scammers use social media, text messaging, and other means to market fake investments, often making getting rich from investing seem easy or quick. In fact, investing is a long game, and most folks build wealth by steadily investing throughout their careers. Here are concrete steps you can take to protect yourself from investing in a scam:

• If an investment sounds too good to be true, avoid it. Promises of high or guaranteed returns are common tactics of scammers. There are no shortcuts to building wealth, and almost nobody does it overnight.
• If you plan to use an investment professional, check their background to make sure they are licensed and registered.
• Don’t fall for FOMO- Fear of Missing Out: fraudsters try to tap into your desire to get in on the ground floor of a cutting-edge investment, often using the latest innovation, technology, product, or growth industry to lure investors into scams. Examples include crypto assets and artificial intelligence.  
• Pay attention to payment methods. Scammers love to ask investors to pay for investments by wiring money abroad, sending gift cards, or using crypto assets. These are red flags of fraud.

Building Wealth

Start saving and investing regularly.

To build wealth, it’s essential to start saving and investing regularly. There’s a proven formula for wealth accumulation: your regular investments plus time equals wealth. The earlier you begin, the more time you have to accumulate savings for your future. To implement this formula, take at least two steps as soon as you start earning an income:

1. Open a savings account at your Sacco and set up an automatic deposit of a certain amount of money into that account every pay period. This fund can help you avoid going into debt when unexpected expenses arise.
2. Most importantly, begin investing a portion of your earnings consistently throughout your career. While investing carries more risk than keeping money in a savings account, it offers a greater potential for long-term wealth creation.

As you embark on your financial journey, it’s crucial to consider your level of risk tolerance. All investments come with some degree of risk, and understanding the different risks and potential returns of each saving and investment product you’re evaluating can help you make informed decisions.

According to Lori Schock, it is equally important to have a strong defence against investment fraud. Fraudsters often use high-pressure sales tactics, promote too-good-to-be-true opportunities, promise guaranteed returns, and rush you into making quick decisions. Never rush into an investment; take the necessary time to research every opportunity before investing. Familiarize yourself with the red flags of fraud to protect yourself effectively.

Be cautious of celebrity endorsements. Many celebrities promote investments through social media, radio, and television. Just because a celebrity claims that a product or service is a good investment does not mean it actually is. Always conduct thorough, independent research before making any investment decisions.

You may face setbacks along the way, but diversifying your investments can greatly reduce the risk of financial loss. If one of your investments performs poorly, other investments can help balance the overall portfolio. Think of it as using a variety of strategies in a playbook rather than relying on the same play repeatedly.

Finally, understand how fees and expenses can affect your portfolio. Some fees may appear small initially, but they can significantly impact your investment strategy over time—similar to the consequences of a costly mistake in a game. It’s also important to ask your investment professional about any penalties that may be imposed if you sell an investment product before its maturity date.