Beware of Scams: Tips for safely investing in the digital world

Today’s digital world is the most egalitarian and the most vulnerable space in the world. One may grow and may perish also. This is truer when it comes to the financial world. 

Digital work has made the financial markets more accessible even to investors who were not inclined to invest in the markets. The digital world is cost-efficient. 

This provides a strong and convincing argument to invest in the markets. But what looks simple is too simplistic. Some people indulge in fraudulent practices and ensnare inexperienced investors.

Hence, it is important to understand the challenges involved in investing in the markets through the various avenues available.

Dummy portals and apps

Nowadays most investors start their journey in the digital world. Even the opening of an account and Know-Your-Client (KYC) compliance are carried out online. 

In most cases individuals get the link or name of the ‘mobile application’ or the portal URL from an acquaintance or through social media. 

This is an important step where investors have to be extra careful. They should check if they are downloading the right app or visiting the official website of a service provider. 

Sometimes online scamsters build a web portal or mobile application that resembles the official one. 

Transacting on such portals or apps can lead to the compromising of the vital data of an investor. An investor may lose money also.

A prudent approach will be to identify the official website and type the website link (URL-uniform resource locator) in the web browser. 

Scamsters, many times, send out a link that leads to a portal which has a domain that looks the same but has jumbled a letter or two which takes it to a fake website. 

For example, instead of www.avoidfraudsters.com, one may end up clicking avoidfraudstars.com and reach a different website.

While looking for a mobile application, it makes sense to download the same from the Google Play Store or the App Store. 

Never use a link received from an unknown source to download a software or mobile application. 

Sometimes fraudsters create look-alike apps as well. Using such apps means allowing scamsters access to money.

In the case an investor gets a message which states that a broker has asked for a KYC update or launch of a new mobile application, then before acting on such moves, do call up the official contact centre and confirm the same.

Also Read: Financial Planning: 4 experts share tips on how to plan your finances for 2024

Fake social media channels

Another channel to dupe new investors for money is to feed them with tips through social media platforms. 

Many times, investors are sent messages and they are introduced to a free social media handle or channel. 

Sometimes scamsters claim that these are run by successful traders, which is not the case. 

Gradually, investors are duped by selling them subscription packages by charging hefty fees. 

In some cases, such handles dump rigged-up stocks on gullible investors. 

There are instances where investors have given the scamsters access to their trading accounts and have lost money. 

Successful traders and investors whose names are used to peddle tips through these channels may have no clue about this. 

Hence, investors need to be extra careful while using the social media platforms.

Investors need to check if there is a connection between a successful trader whose name is being used and the services on offer. 

Also, check if a person has the necessary license to carry out advisory services. 

Only, SEBI-registered entities can offer services such as money management, advisory or financial services distribution. 

There must be a written contract between an investor and the service provider for such services.

Also Read: How fund houses adapted to market valuation change

‘Free’ advice

There is no free lunch in the world. So, free advice given by many social media channels and influencers must be looked at with utmost caution. 

Financial advice can be given by the SEBI-Registered Investment Advisors (RIAs) after taking into account customer-centric aspects such as their financial goals and risk profile. 

RIAs are held accountable for their services, which is not the case with influencers. 

Also, the advice given out on social media platforms may not serve a specific financial goal as it is not tailored to the requirements of an individual. 

So, one may land in the most unsuitable investment.

What should an investor do?

Given the lengthy processes involved to recover money lost, and the pain caused to the victim, it makes sense to avoid falling for such baits. 

Transacting on the official platforms, avoiding unregistered service providers and fulfilling compliance requirements from time to time, help investors to stay on the right path. 

It pays to confirm with a point of contact – be a relationship manager, a branch office, or a contact centre of the regulated service provider before initiating actions in the digital world, when an investor is in doubt.

If a system is easy to navigate for people with simple intentions it is much easier to manipulate for people with complex and ulterior motives.

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(The author of this article is the executive director & CEO of Choice International Ltd – a BSE-listed financial conglomerate that includes stock brokerage and NBFC.)

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.