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Fraudulent Investments: Tips on how to Spot Them in 6 Steps

23, 2021

6 min read

This article has been translated from our Spanish edition using AI technologies. Errors can occur due to this process.

In the past few days, the National Banking and Securities Commission (CNBV) approved the first platform for inter-person loans to act as a Collective Funding Institution (IFC) under the Law Regulating Financial Technology Institutions (Fintech law).

This means that 93 fintech companies are already in the approval process of the CNBV, the Bank of Mexico and the Ministry of Finance and Public Loans, including 34 collective financing platforms or crowdfunding.

“In Latin America we are very used to saving, but not investing. Until recently, it was considered something reserved for people who had a lot of money. The mentality has changed, mainly because there has been more information on financial literacy in the last five years, ”said Héctor Sosa, investor and author of the podcast Goodbye, your boss and spokesman for the Inversiones 2020 forum in an interview with Entrepreneur en Español.

The specialist pointed out that is one of the fastest growing investment vehicles in the region Crowdfunding because it enables you to participate with very small amounts and to open your account very quickly and easily.

“I like crowdfunding because it democratizes access to investment, but there is a risk. As more and more people enter the investment ecosystem, they often do so without adequate information and even with a little innocence, ”says Sosa.

How do I know if an investment is a scam?


Sosa, who is also the author of Investments: Everything You Need to Know to Start Investing, and Multiple Sources of Income: How To Make Money On The Internet, points out before you step into any investment platform that you need to research , and know if it exists Process regulation and adjustment of expectations when entering.

“You need to be aware of the tax obligations that you will acquire. They will likely expand your income and that will generate taxes. You have to pay attention to whether what you generate in the returns, so to speak, justifies this "additional job", "says the expert." It is important to compare before choosing an investment vehicle. There are platforms that go beyond collective funding and also offer very good opportunities. The best thing to do is to determine the most suitable options based on your profile, the risk you want to take and the plan you have with your money. "

Sosa offered us six keys to identify a fraudulent investment.

1. Offers unrealistic returns: Generally, they offer you impossible solid interests. "They tell you, 'I'm going to pay you 10% per month,' but how is that possible when the reference rate is 4% per year and that doesn't make sense. A profit greater than 50% per year is out. To measure, a return of 20% per year in a consistent manner for the Mexican Stock Exchange (BMV) – a market that is volatile but generates good returns – is exceptional and very specific conditions must be given. "

2. They can't tell you how they create value: “Those in charge of the investment or the business explain the origin of the profits from semi-exotic instruments like cryptocurrencies, cannabis, trading, etc. This sounds very complex from the point of view of people who are not familiar with these tools, but the reality is that they only make the extra money that comes in. "

3. If something sounds too good to be true, it might not be: “Just because an investment model is advertised on radio, television, or in the press doesn't mean it's legitimate or reliable. You always have to investigate. If something sounds too good, you can find information about it. ""

4. They ask you to recruit new people: “If the company pays you for the number of people you bring with you, it is a pyramid scheme, supported only by the new money the recruits bring in. Only those who are at the top of the model win. There are multilevels that are legal, but Ponzi or Flowers of Abundance Scams also frequently use this scheme. ""

5. They are not regulated: "If something isn't from the CNBV, the Bank of Mexico and the Department of Finance and Public Credit or the Association of collectives Funding Platforms (Afico) When it comes to crowdfunding, you risk losing all of your money. "

6. It is unsustainable in the long run: “When the business cannot be replicated. You put your & # 39; wool & # 39; actually in something you don't know if you'll see again. ""

Whenever you want to make an investment, be it crowdfunding or multi-tiered, analyze how they work, what risks and benefits they have, and what tax obligations they have. Search for reviews on blogs, YouTube channels, trade media, social networks and podcasts to learn about other users' experiences.

"We have to be proud that fintech companies and crowdfunding have grown so much in Mexico. Like everything else, it has its pros and cons and good and bad players, but this sector is here to stay, it will move on grow and it is. " It is worth understanding how it works, "concluded the financial expert.

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