Read and Understand.

It is important to not only collect information about a scheme but also read the investment brochure or document in detail. There is a possibility that you may come across some negative factors about the scheme or unfavorable terms and conditions mentioned in the fine print.

Verify whether the scheme is legitimate.

We hear about Investment scams very often these days. People get attracted to schemes that someone may have recommended over phone or mail or an agent who may have convinced them to invest in a product or property. It would

be wise to consult a financial or legal adviser to verify the legitimacy of the company that is promoting the scheme and check whether:-

• They have been granted licenses or permits under the concerned Act or Law under which the scheme is allowed to operate.
• The testimonials and references presented by the company are genuine.
• The details regarding their head office, branch offices, etc are real.

It must be kept in mind that the Websites and phone numbers of the companies are not sufficient proof to establish the existence of a company or a scheme. In India, all investment schemes must have the approval of the concerned government authority. This will be in the form of licenses or registration numbers.

Registration of a business as a company under the Act or Law Companies Act or testimonials from the person holding high office or ISO certifications etc. does not necessarily guarantee that the scheme promoted and operated by the company is legal.

Always make payment only by cheque and collect a receipt for the payment made. Remember to cross the cheques “account payee” and draw it in favor of the company or scheme.

Check for hidden charges.

Some investments may carry many hidden charges. The charges disclosed in the offer document may be vague or mentioned in a manner that there may not be enough clarity about how the charges will be applied.

Always assess the risk.

There is no investment we can call as low risk or high return. Every type of investment carries risk, and the higher your expected rate of return, the higher the risk.

Have clarity on the liquidity and safety aspect of the investment.

Your investment should be liquid, or in other words, should be capable of being converted into cash easily. Evaluate the implication of tax on your investments because most investment schemes talk about returns before tax.

Compare.

When you have several investment options, you should compare it with similar investment schemes offered by other companies, and analyze whether the investment will help you achieve your financial goals.

Deal only through Authorised Persons.

Almost every investment company do their business through intermediaries. Mutual funds that are sold through AMFI certified agents are an example. The investor must confirm that the agent who represents that company, is authorized and qualified. Get all your doubts cleared from the intermediary.

“Google”

The internet can provide you tons of information on any topic you need. Search the net before you discuss it with the representative of the investment company. Check for reviews by experts on various investment schemes. The reviews by these people who are experienced will surely benefit you to a great extent to go through some of these reviews.

What to do if anything goes wrong.

Have a clear idea about the options you can resort to, in case of something going wrong. Know about the regulatory bodies with whom you can take up your grievance.

The mentioned above are only the minimum level of understanding you should have before investing.