How to identify an investment scam

By Athenkosi Sawutana

Many people invest a lot of money for their future and that of their offspring. Unfortunately, some of them never reap the benefits because the investments were scams.

Luckily, there are ways you can find out if an investment opportunity is too good to be true.

Tip: Don’t be fooled by scammers. Let us connect you with a trusted fund manager by clicking here.

Telltale signs

According to Lyndwill Clarke, head of education from the Financial Sector Conduct Authority (FSCA), there are various signs that the investment opportunity you’ve been offered should not be trusted.

High returns in a short period

The general rule of any investment is that the higher the investment, the higher the returns. If the fund manager promises you high returns with low risk, you must open your eyes, ask more questions and investigate. If the flyer says: “double your money overnight or within a week” or “20% and more return on your money” that’s a big red flag, don’t fall for it.

Time-limited offer

The scammers want to get hold of your money fast, so that they can scam someone else. They will make you think that they’re offering you some kind of bargain that will expire in a short period. However, that’s a scam that’s meant to make you organise money fast and give it to them unthinkingly. If you see the phrases “The offer is only valid for today” or “for the next few days”, run for your life.


The scammers will have people “testifying” on how much money they made from their investments. These are normally people who are also in on the scam. They work together to make you believe the investment is legitimate and profitable. Don’t believe what they say. Speak to a qualified and trusted financial adviser for the best investment options.

Recruitment of members

If the investment “company” asks you to recruit more people, you should refuse. These are normally pyramid schemes, which are illegal. Money is raised by recruiting people into the scheme rather than buying or selling a product. The more people each person recruits into the scheme, the more money is made by everyone who joined the scheme earlier.

READ MORE: Banking fraud: How to protect yourself

Clarke provides these tips to avoid being scammed.

  • Be vigilant.
  • Ensure that you only deal with authorised financial services providers. These are the companies and persons licensed by the FSCA to sell specific product(s) or service(s).
  • Do not make a quick decision. First do your research on the company or person.
  • Check with the FSCA if the company is authorised to sell that product.

If you suspect you’re being lured into an investment scam, call the police or the National Consumer Protectorate.

A unit trust is a legitimate way you can ensure your money grows over time. Take some time to learn more about it. You can also fill in this form to be connected to an adviser who can assist you.

Recent Articles

Featured Keeping your money safe when travelling overseas

Whether it’s for business or leisure, overseas travel offers you the opportunity to see and experience more of the world. However, it does come with risks, and financial fraud is not the least among them.

The differences between assets and liabilities

There are many investments you’ll make in your lifetime, some of them worthwhile, others not so much. It seems reasonable to imagine that solid investments are assets, and their poorly-performing counterparts are liabilities.

How to avoid being a victim of ATM theft

In South Africa, ATM theft is a big problem. We have a look at what you can do to stay safe while using an ATM, and we consider a couple of tips that are worth keeping in mind.

Should you always buy property with a view to sell?

Property is one of the most significant investments you’ll ever make. Not only does it potentially provide you with a home, but it can offer you a source of rental income, or attract a profit if you decide to sell.


Black Friday at Hotel Sky

Price: R1,050
When: 25 - 28 November 2021
Where: Sandton and Cape Town

Mangwanani African Spa’s Black Friday Deal

Price: From R699
When: 19 - 26 November 2021
Where: Nationwide

Sundowners special at the President Hotel

Price: Available on request
When: Daily
Where: Cape Town

Latest Guide

Guide to debt rehabilitation solutions