The Most Authentic Guide on Personal Finance and Investments

Words of Wisdom : "The man who does not read books, has no advantage over the man who cannot read them." ~ Mark Twain

Scams, scams and more scams...Is There A Long Term Solution?

If I look at various scams that have led to millions of people losing crores of rupees, I see two underlying trends
a) Greed
b) Inaccessibility

Many of the scams are successful in looting people, simply because of greed. People are attracted to promises of high returns.

There is, unfortunately, no answer to greed. Self realization is the only option.

People should realize that promises of high returns are fake. It is impossible for anyone to deliver high returns. Even the genuine investments like shares that can possibly deliver high returns are rare and come with very high risk. Therefore, even if for a moment we believe in the genuineness and honesty of the promoters of any such high-return schemes, the high market risk still remains. Earning high returns "safely" is IMPOSSIBLE.

Mutual Funds and Banks Deposits are both good investments and well-regulated. Therefore, the chances of scams are low. (Of course, cases of mis-selling in these areas are not unheard of. But that is a subject matter of separate discussion. Such mis-selling does not nullify the fact that MFs/Banks are good investments.)

The problem, however, is that except for large cities and some towns, MFs and Banks are not do not have sufficient branches/offices. So for a vast
majority they are inaccessible. 

Even if present, opening accounts with MFs and Banks involve excessive paperwork. Moreover, this is not a one-time exercise. There have been repeated changes in the paperwork, which naturally is disconcerting. Finally, banks and MFs only welcome people with lots of money. Ordinary people are not entertained as they bring no significant earnings. Effectively, despite being present, they are inaccessible to ordinary people.

a) Banks and MFs should simplify the process of opening an account. No paperwork may be demanded for small investments. 
b) Mobile/internet technology should be utilized to make investment and redemption of small amounts quicker and without any physical interaction.
c) RBI and SEBI/AMFI should make going to banks/MFs as simple as walking into a jeweller's shop and buying gold.

This will make Banks and MFs accessible to small investors and hence reduce their dependence on informal channels. Thus there would be less chances of them falling prey to fraudulent schemes.

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Ignorance is like a SIGNED BLANK CHEQUE... anyone can MISUSE it.

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