How to protect yourself from online scams – Top Tips


The internet has changed the way the world works, and that applies to financial investments too. The world wide web has not only opened up new investment opportunities, but it has also created new routes to market, especially for smaller or first-time investors, or for people who traditionally use conventional stockbrokers.

Whilst those new developments are very welcome, every upside has a downside. Sadly there are many sham investment companies set up with the express intention of defrauding you should you choose to invest online. So what are the different types of online investment fraud, and what are the best ways to protect yourself from scams?

The Different Types Of Online Scams

The different types of online scams are as varied, imaginative, and comprehensive as the internet itself. A quick Google search will reveal the scams in all their miserable glory, including:

  • Schemes that promise unreal levels of return
  • Crooked investment management firms that spring up, take your money, then mysteriously disappear overnight
  • Dishonest brokers who take unauthorized fees or commissions from your account
  • Malevolent software that purportedly offers you investment advice, but is actually used for phishing, identity theft, or advising bad trades
  • Seemingly genuine trading sites that refuse to transfer any profits to you

But forewarned is forearmed, as they say. With a little care and thought, you can avoid the most common online scams.

Protecting Yourself From Fraud

There are a number of easy steps you can take to protect yourself from the majority of online scams. Here are some common-sense suggestions:

  • Get wise to the tactics used by scammers: don’t fall for irresistible offers, false promises, and misleading 100% guarantees
  • Do your homework before you start and don’t invest in markets you don’t understand: scammers often target new and inexperienced traders
  • Be smart: use resources like the ScamSmart page from the Financial Conduct Authority (FCA)
  • Never download software from an untrustworthy source: the risks are just too great
  • Always use the safest, mainstream banking methods: certain financial transaction methods are safer than others

Never, ever make investments after a few glasses of wine or bottles of beer: your normal good judgment may be impaired!

Common Industries With A High Scam Risk

Some industries and market sectors seem to lend themselves to ripping people off. If you want to protect yourself from online scams, a good starting point is to be aware of which sectors are renowned for being high risk.


At the highest level, the mining, real estate, construction, oil/gas, and banking sectors have all proved to be highly susceptible to online fraud. And at an individual level, the E-Commerce sector continues to be a minefield at times.

Drilling down into the financial sector in specific, regrettably for any potential online investors, there are four investment areas that are especially open to fraud:

  1. Binary Options
  2. Contracts for Difference (CFDs)
  3. Cryptocurrencies
  4. Forex

However, the good news is that the majority of companies operating in these sectors are genuine, and if you do fall victim to a scam, there are some excellent chargeback companies that can often help to recoup your losses.

What To Look At When Investing Money Online

The old mantra, “prevention is better than cure,” is the best possible advice for protection against fraud. And the next best piece of advice is to walk away if you have any doubts or worries. There are always plenty of other investment opportunities for you, especially online.

Before you even think of handing over any money and investing online, you should run through a simple checklist. Yes, this will take a little effort on your part, but if it prevents you from making a bad investment and being ripped off, it will be time well spent.

For the best scam protection when investing money online, these are the sort of considerations to bear in mind:

  • Is the company fully licensed and regulated? If there’s no mention of these crucial areas, walk away
  • How convincing are the online reviews? Planted, fake reviews often have a phony, repetitive feel to them, and don’t feature a picture of the reviewer
  • How real are the employees? Check out social media applications like Linked-In to see if the employee and company have a genuine presence
  • How trustworthy is the company? Do your research, and check out the opinions of leading newspapers, financial publications, respected brokers, and informed family members and colleagues

How are financial transactions handled, and how safe are they? Remember that certain banking methods are safer, and have more back-ups and checks for protection against fraud.

Questions To Ask Before Making Final Investment Decisions Online

Making financial investments online is quick, easy, convenient… and very exciting! But that same convenience means you need to be doubly careful in order to protect yourself from online scams.

Most people are rightly cautious and sensible when it comes to making real-life, face to face investment decisions. But there can be a tendency for that usual caution, reason, and common sense to go out of the window when investing online. Here are some of the questions you need to ask yourself before making a final decision:

What Is The Company’s Track Record Like?

Online investments are no different from traditional investment methods. You wouldn’t put money into a brick and mortar company without checking it out first. So make sure you do the same with any potential online investment.

What Are The Risks And Rates Of Return?

There’s no such thing as a 100%, sure-fire, cast-iron investment, so don’t get taken in by the hype. If something sounds too good to be true, it usually is.

How Easy Is The Withdrawal Process?

Some companies are exceptionally good at making it nigh on impossible for you to withdraw any profits. Better to check ahead of time than to be wise after the event.

What About The Terms And Conditions?

Thoroughly read and reread every contract. It’s all too easy to be caught out by mean or underhand conditions buried in the small print. Get someone else to check the contract for you, and don’t be afraid to question the company about any doubts you may have.

Following this advice is the best way of protecting yourself from fraud. Every single investment decision comes with an element of risk, and online investments are no different. But by doing your homework, you can greatly reduce or even eliminate the chances of being ripped off.

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