Stock market investment opens a gateway for traders & investors to earn passive income and also to build a full time career. There are multiple opportunities, but lack of awareness and knowledge among emerging traders open the door to potential frauds.
These fraudsters come up with new schemes to trap group of traders who eventually end up losing their capital. All these scams and fraudsters share one or the two multiple traits.
So, a bit of awareness and alertness can protect you from falling in such scams. Here we have shared 5 common types of stock market scams that are increasing significantly these days and the tips to save yourself from such scams.
1. WhatsApp & Telegram Tips
With the introduction of messaging apps like WhatsApp & Telegram fraudsters have found a new way to loot people. They first make traders to join their group by running ads on social media or on Telegram itself.
In the group they lure traders by sharing fake PnLs screenshots. Later they provide them with different premium plans under which they provide stock market tips & advisory services.
Most of these tip provider are not registered with SEBI and even if they are registered with SEBI they are doing so by violating guidelines & regulations.
Eventually, the retail trader end up losing money and with the option & hope of recovering losses only if they file a complaint against RIA (registered investment advisor) on SCORES & different platforms.
How to Protect Yourself:
- Don’t Join Any Random Trading Group: Few WhatsApp & Trading Groups are created with an intent of sharing stock market details and news.
Such groups are useful but any other group which shows you dream or misguide you by sharing trading tips is a big red-flag that you must avoid to join.
- Do Your Own Research: Don’t follow any trading tips blindly. Always conduct your own research before making any investment decision.
You can start this by learning and gaining knowledge of stock market technical & fundamental concepts. - Avoid Pressure: Be cautious of any pressure put on you by Group admin to act quickly on buying their services or following their tips.
2. Account Handling Scams
Okay, one honest answer, how many of you will share your bank details with a person who contacted you through social media, or any messaging app?
None of you. Good, you must not.
But when it comes to trading account, why you break this rule and go ahead with sharing your login credentials.
Even if you know someone, sharing login credentials is something that can lead to big losses. These scammers often misuse the funds, make unauthorized trades leading to losses and later block your number.
Now, in such cases, you can approach to Cyber Crime to report the case with complete documentation and proofs. But here is the question does Cyber Crime refund money?
The answer is not straightforward as it depends on many parameters like time taken to report the case, documentations with enough proofs and terms & policies of the system.
How to Protect Yourself:
- Never Share Your Account Details: Only PMS managers are allowed to do account handling and that too with the portfolio of ₹50 lakh or more. Apart from them, you must keep your login details to yourself and not even share it with your stockbroker.
- Monitor Your Account: Regularly review your account statements and trading activity. Report any unauthorized transactions immediately.
- Verify Credentials: Even if someone claims to be a Portfolio Manager, always check & verify their credentials.
3. Profit Sharing Schemes
“Not having time to trade, just follow our tips and we will share 50-50% profit.”
Have you ever come across such statements. If yes, then beware as scamster is waiting for you to fall in his trap of guaranteed returns & high profit.
Their tips may initially convincing you to add more funds but eventually disappear after giving you big loss.
How to Protect Yourself:
- Don’t Fall in the Trap of High Returns: Investment with high returns come with high risk. And if someone claim 100% profit or guaranteed returns that is often a red flag and signal for you to run away.
- Avoid Upfront Fees: Be wary of schemes that require upfront fees or investments without a clear, verifiable business model.
- Avoid Falling Profit Sharing Model: If someone is so equipped in trading then he can do trade by himself and keep 100% profit. Why would he work for others to earn 40% or 50% where he can earn 100%. Just read and rethink before falling in the trap.
4. IPO Scams
Increasing IPO scams have lead to financial loss of thousands of retail traders. In this scam, people are provided with link where after registrations they are asked to add fund to buy IPO which appear legitimate.
The fake link then lure them by showing fake allotment and profits. When traders try to withdraw that fund, the app ask to deposit 15-20% tax on profit.
This makes them realize that they have been scammed.
How to Protect Yourself:
- Always Invest in IPO Using Broker’s App: IPOs are issued in the stock market after SEBI approval and are available on broker’s trading app. One must always apply in any IPO only through Broker’s trading app.
- Add Fund in Registered Broker’s App: Fund to apply in IPO must be added only in the registered broker’s trading app. Anyone sharing third-party bank details is the biggest red flag that big scam is awaiting.
5. Clone Trading Apps
The tech-savvy scammers found new way to scam people, where they have created fake trading apps that mimic trading apps of top-notch stockbrokers.
Confused traders, register to this app and add fund with an objective to trade in the stock market not having an idea that it is getting transferred to scammer’s account.
These app shows fake data and profit that lure traders who end up adding more fund and later when they try to withdraw the amount, the app stop working or do not allow them to do so.
Thousands of people have become victim to clone trading app losing capital worth crore.
How to Protect Yourself:
- Download from Trusted Sources: Only download trading apps from official app stores like Google Play or the Apple App Store.
- Verify the App: Check the app’s reviews, ratings, and developer information. Compare with the official website of the trading platform.
- Be Cautious with Personal Information: Be wary of apps that ask for excessive permissions or sensitive personal information.
Conclusion
While the stock market offers lucrative investment opportunities, it also attracts fraudsters who use their brain to scam people. By staying informed and vigilant, you can protect yourself from these common stock market frauds.
Always verify the credibility of sources, conduct thorough research, and use reputable platforms and brokers for your trading activities.
Remember, if an investment opportunity sounds too good to be true, it probably is. Stay cautious and safeguard your investments to ensure long-term success in the stock market.
