Beware of Scam Investments: How to Identify Fraud and Protect Your Money

Investing is one of the best ways to grow and multiply your finances. Not only does it protect your current financial condition, but it also helps you build wealth for the future.

Investment comes in two main forms: financial products and direct business investments such as offices, retail shops, or property. Among financial products, mutual funds remain one of the most popular choices.

Understanding Scam Investments

If you’re planning to start investing, you need to be aware of the increasing number of fraud schemes today. Scam investments (investasi bodong) occur when someone asks you to invest your money into a so-called “business,” but the business does not actually exist.

Once you transfer your funds, the scammer disappears. This is why you must stay cautious and avoid handing over money without proper verification.

Data from the Financial Services Authority (OJK)

According to the Financial Services Authority (OJK) in Indonesia, as of July, 99 illegal investment schemes were identified, all operating without proper licenses and preying on public ignorance.

These fraudulent schemes often lure victims with promises of unrealistic, fast returns. Therefore, extra caution and due diligence are essential before investing.

Characteristics of Scam Investments

Recognising fake investment schemes is not difficult. Here are the most common red flags you should watch out for:

1. No Official License or Fake Licensing

Scam investment groups usually do not have valid business permits.
A legitimate financial institution must have:

• Legal corporate documents
• Government authorization
• A verified license from OJK

Always verify the company through official government channels. This simple step can help you avoid financial fraud.

2. Promises of Unrealistic and Excessive Returns

Another clear sign of fraud is investment offers that sound too good to be true, such as guaranteed profit, extremely high returns, or no risk at all.

Real investments always fluctuate based on economic conditions. When the economy is good, returns increase, and when it isn’t, returns decline. Anyone promising risk-free profit is not offering a legitimate investment.

3. The Claim That You Can “Withdraw Anytime.”

Fraudsters often say you can stop anytime and withdraw your money instantly, along with all profits. This is a major red flag. Real investments have specific time periods before withdrawal is allowed. If a company promises instant exit with guaranteed profit, it’s almost always a scam.

Types of Mutual Funds (Safe Investment Alternatives)

There are many legitimate investment instruments you can choose from. If you want to start with a low budget, mutual funds are a great option.

Here are the main types:

1. Money Market Mutual Funds

These allocate 100% of funds to money market instruments such as deposits, SBI (Bank Indonesia Certificates), or bonds with maturities under one year.

Advantages:

• Stable returns, suitable for short-term goals
• High liquidity (T+2 withdrawal)
• No buying/selling fees
• Lower risk compared to other mutual funds

2. Fixed Income Mutual Funds

These invest at least 80% of funds into bonds.

Benefits include:

• Ideal for long-term goals
• Some funds distribute regular income to investors

3. Protected Mutual Funds

These funds protect the value of your initial capital by investing in investment-grade debt securities.

Benefits:

• Capital protection at maturity
• Predictable returns over a set period

4. Mixed Mutual Funds

These allocate up to 70% into a combination of money markets, stocks, and bonds.

Advantages:

• Suitable for medium- to long-term goals (3–5 years)
• More flexible in adjusting to market conditions

5. Equity Mutual Funds

These allocate at least 80% into stocks.

Benefits:

• Potential for higher long-term growth
• Best for investors with a high-risk tolerance
• Ideal for investment periods above 5 years

Scam investments continue to target unsuspecting individuals. By understanding the warning signs and choosing legitimate investment instruments, you can protect your money and invest with confidence.

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