How To Spot An Investment Scam

I know of a lot of people who are very apprehensive or sceptical when it comes to investing; and a lot of the time this is due to the fact that they feel that it’s really a minefield out there- they are afraid of being scammed or losing all their money in a fake investment. So, what are some red flags to look out for? How can we spot an investment scam? Here are some things to look out for…

  • Guaranteed Profits

To me, this is THE MOST obvious and biggest red flag. Any ethical and licensed professional will tell you that all investments come with some risk. If you’ve read my previous articles, you will know that investments can and should be based on your own risk tolerance, and investment returns are never guaranteed. If an investment promises you guaranteed profits (usually at a high rate of return)…it’s most likely a scam.

  • Ridiculously High Returns, Usually In Short Periods Of Time

Ah, the second most obvious red flag. If someone tells you that your investment will make you high returns in a short period of time (like 40% a month), and that you have to get in or get out quick- it’s most likely too good to be true. Fixed deposits give returns of say 3%, endowments at about 3-4%, mutual funds can be around the 8% mark, and even stocks can give you average returns of 12%, all of which is on an annual basis. So this just shows how ridiculous and preposterous such returns on a monthly basis can be.

I always let my clients know that investments are long-term commitments, so if you want a ‘get rich quick scheme’, you are more likely to fall into the hands of a Ponzi scheme. What is a Ponzi scheme? This investment fraud model works by a person offering their first investors high returns on their initial investment. Then, they find new investors and give their money to the original investor, making it seem like their investment has legitimately grown. This continues by recruiting new investors to fund the old ones, whilst lining the scammers pocket with the excess. Once the scammer is unable to find new investors, the scam dries up, and the whole thing crashes. This is similar to a Pyramid scheme (more like a web than a pyramid), that promises quick returns. Those who are involved are incredibly vulnerable of losing it all.

  • They Use Telegram Or WhatsApp

Another, less obvious red flag is if you are given very little information about the investment or company themselves, but you are then added to various ‘investment group chats’, with people from different countries all discussing how the investment is going. Maybe there are members of the group that are hyping up the investment, encouraging those to buy more shares. Chances are they are using a ‘Pump and Dump’ method, whereby an individual drives up the price of an investment by encouraging others to buy, driving the price up. That person then sells, earning loads, and the overall investment crashes, causing everyone else to lose out.

  • Unwillingness to Explain Investment Strategies or Methods

If someone tells you that they have managed to obtain riches and live a life of luxury due to an investment, but are unwilling to share with you a concrete strategy for how to invest, chances are it’s not real. They may have rented the luxury items they flash, or their lifestyle is not as amazing as it seems. They use buzz words and generic concepts, instead of legitimate financial methods. They may promote high risk trading strategies, such as crypto or forex, without explaining the massive risk these can of investments entail, essentially convincing you to gamble with your money.

  • They Are Not Licensed

If all else fails, check whether the individual is licensed. In Singapore, financials are heavily regulated. Financial institutions should be regulated by the Monetary Authority of Singapore, and we have to have an RNF code that allows us to practice our business. In Singapore, there are very many regulations against foreign investors purchasing investment plans, to prevent money laundering, and professionals are not allowed to solicit advice unless it is in Singapore. Everything is also heavily documented; there is a lot of paperwork that is involved in Singapore investments. So, if someone promises you something quick and simple, with no paperwork and overseas transfer, or is unwilling to share they license code or business info…you guessed it…it’s a scam.

All in all, the age-old phrase, ‘it’s too good to be true’ is definitely the case when it comes to investments. If something is really going to make someone rich, quick, without little to no knowledge or effort, everyone would be doing it and we’d all be loaded, which clearly is not the case. The truth is, in Singapore, we have a very well-off population. And how do they get like this? By trusting professionals and financial institutions with their money, and using financial methods like dollar cost-averaging and holding long-term. If it ain’t broke, don’t fix it- be weary of new companies or investments that promise you the world with little to no credentials to back it up.  

What Is An NFT?

This question has been cropping up all over Twitter, in conversation, and was even the first question that came up when I started typing into YouTube. So what is an NFT, is this going to be similar to the Dot Com Bubble or the Tulip Mania in 1634? (Yes, this is where Dutch people thought that tulips were super cool, so much so to the point that a tulip bulb could cost 10 times the annual income of a skilled worker.) Let’s dive a little deeper into the internet’s latest craze.

Let’s start with the basics- NFT stands for ‘Non-Fungible Token’. To be honest, the word ‘fungible’ was one that stood out to me, not because I like that word, but because its definition is so specific and complicated that it’s easier to just say ‘replaceable’. Essentially, this means that an NFT is unique, one-of-a-kind, like the Mona Lisa or the Venus De Milo. An NFT is unlike any other. The T, token, is all to do with blockchain. Essentially, blockchain is a public record of transactions; so if one person makes a transaction, everyone else can see it, and it’s almost impossible to change, hack or cheat the system. This kind of technology has become very popular as peoples’ mistrust of centralised banks increases.

This is all well and good, but what do all these concepts have to do with GIFs? Or random pictures online? In theory, this all boils down to human psychology. Who decided that gold was valuable? Or paper money, or fine art, or….anything for that matter? If a large enough group of people decides that something is of value, then it becomes so. A large group of people basically decided that things online (tweets, pictures, music, highlights of an NBA game, you name it) are valuable enough to have a numeric value to them. But, how can someone buy something that doesn’t tangibly exist? Well, with blockchain, we have the technology to be able to put these purchases on public record, so that no one can dispute that a specific person has bought a specific image, or whatever it may be.

Does anyone remember Nyan Cat? That strange little GIF way back when Myspace was a thing? It’s a GIF of a pixelated flying rainbow cat? Well, in February, Nyan Cat’s creator Chris Torres sold the NFT version for roughly $580,000 USD. This was the first ever meme to be sold as an NFT, and I think it does mark a new era where digital artists can have the same recognition as normal ones.

And I know that all this may seem ridiculous to some, ‘how can you own something that doesn’t exist’, but the reality is that our world is now moving online. Back in the 90s, the internet was taking off; people would never have imagined that all our banking can be done online, we can send people money via our phones or that we wouldn’t need a physical credit card or cash to make payments. Isn’t that the same as us thinking that NFTs aren’t real? Money is no longer just tangible cash or card- it’s a figure on our computer screen. So I think it’s only natural for the world of investments to head in this direction. I think that the stage our world is at with NFTs, is the stage we were with the internet in the 90s. It’s a hype right now, the new technology is exciting. But, will it crash or burst like the Dot Com Bubble, the Real Estate Bubble or Tulip Mania? Is this all a fad that will burn out- the brightest star burns quickest…will that be the same for NFTs?

Why Should Expats Invest In Singapore?

This question often comes up a lot. A lot of expats don’t even know if they can invest in Singapore, let alone if they should. Locals and PRs are automatically enrolled into CPF, which they can use to pay for medical, housing and have money set aside for retirement. Because us expats do not have access to this, I would encourage expats to start setting aside money for these areas; we already know how expensive medical can be (which can be tackled with insurance), and buying property is costly wherever you are, and we all need to set aside for when we retire (the earlier the better!) Investing helps to beat the rising cost of goods and services; you can usually estimate inflation at 2%, so in order to make sure your cash doesn’t lose buying power, you need to beat this rate. With a current account in Singapore gaining interest of 0.05%, you’re actually losing money by keeping it there.

But why invest in Singapore if we’re not from here? I’m going to list a few reasons why expats should invest in Singapore.

Singapore As A Business Hub

Singapore joined the ASEAN Economic Community on the very last day of 2015, and since then investors and business people alike have viewed Singapore as a safe and efficient entry point into South East Asia. Not only is our geographical location very advantageous, our technology and infrastructure is highly advanced in comparison to neighbouring countries. It is the world’s busiest port and a top location for investments in the Asia Pacific region. Singapore is often number 1 in many business surveys:

  • #1 Best business environment in the Asia Pacific and the world: Business Environment Rankings (BER) 2019, The Economist Intelligence Unit
  • #1 in the Asia Pacific and #5 in the world for Best global innovation: Global Innovation Index 2018
  • #1 in achieving human capital (knowledge, skills, and health) in the world: Human Capital Index 2019, World Bank

All these accolades prove that Singapore is a credible and reliable country for people to invest; most of the globe’s largest companies have a base here, and are very successful, so this is a good indication for individuals that this is the place to invest.

Stable Economy

This goes hand in hand with another great reason to invest in Singapore- our economy. Singapore has arguably the World’s most stable economy, with no foreign debt and a consistent positive surplus. As of last year, the Monetary Authority of Singapore owns over US$270 Billion in assets, and Singapore dollars are backed by gold, silver and other assets (unlike other fiat currencies that are no longer backed by gold), meaning that Singapore’s dollar is one of the most stable. The MAS (Monetary Authority of Singapore) regulates foreign exchange rates, keeping it stable.

 This is in great contrast to neighbouring countries’ currencies, like two of the weakest in the world, Vietnamese Dong and Indonesia Rupiah. Internal and external conflicts, civil unrest and clashes, incorrect economic decisions of the government and dependence on raw materials cause further instability.

Imagine going for a coffee one day, it costs $2, the next it costs $10 and the day after it costs $5…does that sound like fun? Of course not- it’s not ideal to invest in a currency that changes on such a regular basis, especially if you want to exchange it into another currency.

For example, trading between Australian Dollars to Great British Pounds, Japanese Yen, US Dollars or Euro is often incredibly volatile (some of the highest volatility in the world), so do you really want to keep losing money every time you convert or transfer?!

Regulations

The government and laws that this country implements, give business people and investors peace of mind when they park their money here; anti-corruption laws are heavily enforced, and the MAS ensures that entities must hold licences to engage in fund management activities. That means that if you invest in something that is regulated by MAS, you have no risk of this company being a cowboy, blowing all your assets of being part of some Ponzi Scheme. So long as they are regulated, you are guaranteed transparency, anti-money laundering and no dodgy dealings. This is a great safety net for first-time investors to know about.

Tax Benefits

Many countries heavily tax investments and overseas residents. Singapore is involved in many tax treaties and avoids double taxation where possible. Capital Gains on investments from financial institutions are not taxed (unlike in countries such as India and Australia) and there are tax reliefs available to foreigners, especially if you’re investing and using things like an SRS account.

Looks Good On PR Application

This point might be very appealing for some; Permanent Residency. For those trying to obtain PR, this can really work in your favour. While the scoring process is shrouded in mystery, we know that financial ties to the country are big bonus points on the application. If you have invested in Singapore, with a financial institution, it shows that you are dedicated to growing your wealth here, and achieving your long-term financial goals in Singapore. Note that it doesn’t have to be a large sum, even if you’re regularly contributing small amounts, this is great too.

Can Be Accessed Anywhere

One of the main questions I hear when I’m planning investments in SG is, “What if I move back to my home country? Will I still be able to access my money?”. The simple answer is yes; whatever money you have invested in Singapore belongs to you, regardless to where you are. Top up or withdraw with ease whilst abroad. This, paired with the strong and stable currency, means that if you move abroad later, you may also see the upside potential to your SGD going further in a different country. Win-win!

I do think that there are many more reasons why investing in Singapore is an excellent idea for expats, but that’s for another day. For more information on SRS, PR Applications and how investments work in Singapore, feel free to contact me using the comment section, or by scanning the QR code below.

Investment vs Insurance- Which is More Important?

Whether we like it or not, when we become adults, we have to start thinking about our personal finances and planning our future. For those who have not been taught about finances (I know pretty much none of us learnt this in school), planning finances could be a daunting task. The words ‘investment’ and ‘insurance’ often fill people with dread; is it a scam? Why should I spend my money on that? Do I need it?

The long and short of it is, both are important and you need both. But is one more important than the other? Let’s look at both and see for ourselves.

There are lots of kinds of insurance products but they all cover one thing- loss. The whole point of insurance is that it covers us if something goes wrong. This may be a hospitalisation, a disability, an illness, or some other kind of liability that would set us back financially. It is meant for protection; protecting us from the adverse effects of not being able to work or financial hardships. Many people think that planning for these things, such as death or disability, is a morbid topic and a worst-case scenario. But good health is never guaranteed, and it’s always best to get these things sorted before it’s too late. Insurance products also become more expensive as you get older, so it’s best to start early, so that these payments don’t interfere with any of your future life stages like purchasing a house or sending your kids to school.

Investing is all about growing money for our future- we can either plan for a passive income stream, so that we don’t have to rely on work so much. Or, we can plan for capital gains, so that we have a nice chunk of money when we want it. The idea of making money with not necessarily putting too much effort in (check out my articles about passive investing), is an attractive one. And, if we make all this money, why do we even need insurance?

Unfortunately, the truth of the matter is, it is unwise to have one without the other; investment increases our upsides, but insurance protects our downside. If you invest without being insured, you run the risk of losing it all should you fall sick or become hospitalised (also, can I just say, it’s very naïve to think you will stay healthy forever), especially if your investments are not enough to pay for your bills. If you just insure yourself without investing, you are selling yourself short, only planning for the bad things that can happen, and not planning for the good times ahead. It also means that you may have to constantly work and never be able to retire. Neither insurance nor investments will work on their own; you need to plan and review both in order to be financially successful.

A very important thing to take note of is that investments take a long time to accumulate, especially if you cannot set aside a lot of money to invest. Insurance policies cover you pretty much as soon as you get them. So, it’s always important to sort your insurance out first; once you are protected you can focus on growing your money.

But do remember that investing and insurance is never fixed and one-size-fits all. You need to constantly review your finances in order to keep up with your changing needs!

How To Be A Successful Investor!

You may think that investing is not for you; maybe you’re not experienced enough, maybe you don’t have enough capital. But, the whole process of investing is not as scary as you think. Follow these simple tips and start investing successfully.

Start Before You’re Ready

This may seem counter-productive, but hear me out. Have you ever refrained from doing something, for fear of the risks? And then the thing you didn’t do, happened, and you regretted it? Hindsight is a fickle friend, so don’t miss an opportunity to start investing. Tackle your fear and start before you’re ready, because, to be honest, you will never be ready; “I’ll wait until next month…Let me do it after I’ve paid my bills…Maybe next year.” Take the plunge! If you don’t, you’ve already missed out on so much time you could have been investing.

Don’t Be Emotional

This point is crucial. You have to take all emotion out of investing, mainly fear and greed. If you see your investment plunging, your first response may be to sell, out of fear of losing even more. If you see stocks going up, you may want to buy before they go up higher, out of greed. Doing this eventually leads to buying high and selling low, losing you money in the long run.

  Instead, take advantage of dollar-cost averaging (the concept of buying the same amount at regular intervals). This method makes your investment almost robotic. Another thing you can do as well, is to make your payments into your investments automatic. Set up GIROs or transfer straight away after you get paid, so that you don’t even think about it.

Plan Situations In Advance

Another great tip is to have a set of ‘rules’ before you invest, so that if X was to happen, you already have a Y. For example, if you have a target buy price of a stock in mind, stick toit and do not deviate. This forward planning also helps you take emotion out of investing and manages your fear and greed.

Use Volatility To Your Advantage

Volatility is inevitable with investments, similar to if you go to a theme park you know there will be rollercoasters. A quality of a true investor is being able to hold onto their investments through times of great volatility. Even though it’s scary when investments go down, it’s not permanent. Stocks do not permanently lose their value. Use times of volatility to define your objectives, focus on what stocks are trending and always remember to be prepared for these situations. It’s all part of the game!

Do Some Homework!

Learn about the world around you; politics, technology, science, all have an effect on the financial world. Read up on current affairs and look out for things that could affect the economy and stock markets. The more you read, the more you will start to see trends in the market. I recommend reading The Economist, Business Insider and Bloomberg.

Know What Kind Of Investor You Want To Be

There are two types of investors; passive or active. Passive investors invest in mutual and index funds. If you’re unsure what these things are, check out my article “Investing Terms You Need To Know”. Passive investors benefit from long-term growing financial markets. Their investments are managed by fund managers, shuffling their money around for them on a regular basis. I would consider myself a passive investor; I leave the experts to do their job and just put my money in these funds over regular intervals. This, along with dollar-cost averaging, helps me remove my emotion from investing.

  An active investor has to be very committed, professional and knowledgeable in what they are doing. If you decide to be an active investor, do your research! Know which stocks you want to invest in and be prepared to keep an eye on them. Try to be robotic about it and apply the previous tips.

Have A Long Time Horizon

I’ve mentioned it before but an investor who holds onto their investments longer, usually benefits the most. While the stock market is often volatile over shorter periods of time, the economy generally grows year by year; the inflation rate in the US in 2010 was 1.64%. In 2021, it is currently 2.21%. While inflation rate is annoying in terms of making things more expensive, it is an indicator that the economy is doing well. A higher inflation rate means more spending, more demand for products and triggers more production to meet the demand.

  This means that if you hold onto your investments for longer, you are avoiding short-term losses and in turn benefitting from the growth of the economy.

To conclude, no one can be the perfect investor (if that was the case we’d all be rich), but if you follow these steps you are more likely to make better choices and become a successful investor!

How I Planned My Finances

People often ask me how I became so financially literate and what I did to make myself financially stable. So, I thought I would share with you how I planned my finances in Singapore. First of all, I will say, I’m very lucky to have parents who taught me from a young age how to save and be frugal. But, moving to Singapore I realised I needed to do more than just save. So here’s how I did it.

Step One: Have an Emergency Fund

This first step was crucial, as you will see in my story later why. I saved 6 months’ salary in my bank account, as a buffer should anything happen. This meant that rent was never an issue, even with putting a deposit on a new rental and moving apartments. It also meant that I had less buyer’s remorse and I knew how much I could afford to spend on my days off.

Step Two: Spend Wisely

 Pre-covid, I travelled a lot. A lot of people, particularly those back home, would often ask me how I did it. It was really quite simple; I often travelled to countries where the Singapore dollar went far. I booked cheap accommodation and ate local food. This kept my budget quite low.

  Also, in Singapore I don’t tend to buy a lot of things. I mostly spend on going out for meals or activities with friends, which I find easier to manage, especially if the restaurants are cheap!

Photo by Karolina Grabowska on Pexels.com

Step Three: Get Covered

Remember earlier I mentioned why an emergency fund is so important? Here’s why. In 2019 I found out I had to have an operation- it wasn’t a particularly big surgery, but it was a crucial one. My doctor had found a growth and was unsure if it was cancerous. It was causing me a lot of discomfort and affected my personal life greatly. I was told that the estimated bill would be roughly $19,000. Thankfully, I had health insurance. Even though foreigners have to pay the cost upfront, I managed to get every penny back through my hospital plan, even the doctor’s appointments leading up to the surgery. It was a massive relief. Luckily, I had the money upfront to pay, but can you imagine if I never got that back? Expats often see insurance as unimportant, maybe because healthcare is free back at home, but it’s a fact that Singapore is not a welfare state, so don’t treat it like one.

Step Four: Don’t Leave it Too Late

I went on to purchase critical illness coverage, as I knew deep down in the back of my head that having an operation at 25 (especially one where the C word comes up) is not normal. (I’m fine by the way, it wasn’t cancer.) So, I felt that it was best to be fully covered for critical illnesses. Hospital plans are not sufficient. Imagine if I were diagnosed with Cervical Cancer, and just had a hospital plan? It wouldn’t cover my change in lifestyle; having to take taxis everywhere; maybe hiring at home help; having to maybe order personalised meals. Not to mention the fact that I wouldn’t be able to work if I was going through chemo. A hospital plan definitely wouldn’t cover all of that.

Photo by Pixabay on Pexels.com

Step Five: Invest

Ok so I had an emergency fund, I was protected and covered insurance-wise. Now what? How did I make my money grow quicker than leaving it in the bank? My current DBS account has an interest rate of 0.005%…. I’m not being funny but that’s rubbish. So, I took a portion of my savings and invested it in unit trusts. I purchased investment policies that contained a mixture of sub-funds that are managed by portfolio managers. I’m not one to sit and watch stocks and manage that by myself, so I’m very happy to let a professional do that for me. This will help me achieve my long-term goals of purchasing a property and having a very comfortable retirement.

I pride myself on not living paycheque to paycheque; I actually can’t remember the last time I did live like that! I always reflect on these five things and review how on-track I am with my financial goals. I hope this helps those who are confused on where to start. How do you plan your finances? If you feel that you have any questions or need any help, please do get in touch.

3 Steps Before You Invest!

Everyone wants to make money, and more and more people are starting to realise that working a 9-5 is just not going to cut it anymore. But if you don’t have the luxury of running multiple businesses from home, or being your own boss, the easiest way to grow your money is to invest.

  Investing is the concept of allocating assets, usually money, into different financial vehicles, such as stocks, bonds or mutual funds, to create a profit. The bare minimum investment should be doing is beating inflation. Inflation is a measure of the rate of rising prices of goods and services in an economy. In short, over time our hard-earned money is worth less, due to the rising cost of products. It sounds somewhat bleak, and with average inflation currently working at 2.5%, the chances of saving decent money in a savings account that offers 0.5% seems slim. But a lot of investments are offering high non-guaranteed returns, often from the rate of 8% upwards. But what are the three things to consider before you put your money into investments.

1. Build an Emergency Fund

At a glance investing may seem like an obvious choice when it comes to saving money. Why not just throw all your savings into investment if it means high returns? The answer is that investment returns are NOT guaranteed- even the safest investments come with some risk, and sometimes the lock in periods are high, or the penalty for withdrawing early is expensive. To ensure that you are not over-investing, make sure that you have an emergency savings fund that is easily accessible. That way, should an emergency arise (like a large hospital bill or having to pay for car repairs), you can use your emergency money instead of jeopardising your investments.

  The recommended amount you should have in your emergency fund is 3-6 months of your monthly salary. This should be a healthy buffer should the worst happen. If you already have more than that, then that’s a great time to consider investing.

2. Be Debt-Free

Before you do any investing, you should really consider paying off your debt. Having a credit card bill is fine, but having any large or bad debt will hinder you in your long-term goals. It seems counter-productive attempting to make lots of money with investments, whilst paying off lots of debt. It may be difficult paying off student debt or large loans, but you will reap the benefits in the long run when your debt isn’t eating into your assets.

3. Set Your Investment Goals

This step may seem unnecessary but it is honestly THE most important step- defining your goals. What is the reason for investing? If you are doing it out of pure greed then your judgment will become clouded when it comes to riskier investments and you risk losing it all. So have a long and hard think about why you want to invest. You are putting your money, that you worked hard for, somewhere that could give you high returns, or give you nothing. Therefore, it’s best to have a long think and define some clear goals for your future. Do you want to plan for your retirement? Save for a house? Pass something on to your children? Whatever it is, decide how much you would need and by when. Most investments are a longer-term commitment, so it’s OK to think big. If you have no clue and are just investing for the sake of it, you will quickly lose your drive and passion for making money.

These steps may seem simple, but they really are the key to an effective investment strategy. If you found this article useful, comment below your favourite tip. Don’t forget to share it with your friends who are thinking about investing.