BANGALORE: Every few days we get to read about fraudulent investment, fake get-rich-quick schemes and other economic offenses. Such incidents reflect the fact that we are often tempted to enter investments that yield high returns without paying much heed to the risks involved therein.

As an investor it is necessary for us to be wary of such scams and protect our hard-earned money from getting drained overnight.  And to help you in this objective we have put together a list of foolproof measures that you should follow before signing on the dotted lines. Credit?  credit?

1. Ask For The Nature Of Investment

First thing an investor should ask is about the nature of their investment. There are many names in the marketplace: contribution, share, advance and installment. But the face is that there are only two things in finance, namely, equity and debt. Either you are a lender to the company, or you are a part-owner of the business.

If there is a promise of interest and the principal, and the scheme runs for a specific period, then it is a borrowing scheme. If there is no periodic return, but there are promises of growing the value of the investment over time, then it is equity. Both are risky. Investors should be able to cut through the marketing hype and figure out the nature of the commitment. If this is too tough and complex to understand, it is better to stay away, however fancy or attractive the terms might appear.