Mutual Funds & Fraud What You Need To Know
What Are Mutual Funds? ●
Explained simply, a mutual fund may be described as a professionally managed financial pool of money that has been collected from investors such as you and me.
●
The asset management company then invests the collected pool into various investment opportunities such as stocks, bonds, money market instruments, and other securities.
●
It is perfect for investors who don’t have a substantial amount of financial assets, time, or interest in the stock market. The upside of such an investment is that the investor gets to build a well-diversified portfolio that’s actually managed by a professional.
Mutual Fund Fraud While mutual funds are considered to be a safe investment option, it’s subject to market risks. With rising interest in them, fraudsters and scammers are also entering the arena. There have been several instances where fake financial ‘experts’ have convinced investors to invest in funds that simply serve their interests. For their own advantage, they may also misrepresent funds, which is why investors must practice caution and do their own research before investing.
How Mutual Fund Frauds Happen ● Brokerage fund or fund issuer mischaracterizes or holds back information about where the funds will be invested. ● Recommending particular mutual funds only because the advisor or brokerage firm will receive higher commissions. By putting their interests ahead of that of investors, they violate their fiduciary obligations. ● Scamming investors by overcharging fees. ● Fraudsters and scammers getting access to your funds with the help of your personal information or through fake IDs.
How To Not Be A Victim Of Mutual Fund Fraud?
Do Your Homework
Practice Cyber Hygiene
Ask Questions!
Tips To Keep Yourself Safe While Investing ● ● ● ●
●
Keep your bank account details and mutual fund folio information private. Register to receive alerts of all your folios. Review your mutual fund statements every month and report fake transactions or anomalies immediately. If you choose to invest through online means, be wary of spam and make sure that you read reviews of the company very carefully before you proceed. Remember that companies are required to undertake standard security measures before they ask you for your private information. Don’t share your social security number or bank account information through unmediated channels. They could be fake brokers out to get your money!
●
●
●
Thoroughly read and review the prospectus as well as annual shareholder reports before you choose to invest in a mutual fund. This will go a long way in protecting you from scams and financial losses. The broker must walk you through the risks as well as the fee structure clearly. If they haven’t discussed these things with you, they may either be inexperienced or trying to scam you. Is your broker persuading you to trade every now and then? Typically, investing in mutual funds is considered to be a long-term wealth creation strategy. It is possible that your service provider may be siphoning off your funds and making trades that go against the law. Do go through your monthly statements to keep track of your investments.
THANK YOU! Presented by: Aarti Shah, Manager, Money 2.0 Conference https://www.money2conf.com/