How to Scan a Scam

Q: I have a question regarding investment. What’s your idea about an investment [instrument] that will double your [invested] money after month, and every month it will continue to double? Is it allowed [in shari’ah] or not?

A: My rule of the thumb is this: once it is too good to be true, then it most probably is a scam. If there is really such a legitimate and moral instrument, then I don’t see any problem with it.

Q: How to identify a scam, sir? The one who offers [me] to invest is the owner of a company and who seems to invest the money in a business venture.

A: You see, according to this claim of 100% return of investment (ROI) per month, if you invest P100,000, it will become P200,000 after a month; then your P200,000 will become P400,000 after the second month; your P400,000 will become P800,000 after the third month; and your P800,000 will become P1.6M after the fourth month. It means to say that according to this claim, by investing only P100,000, you will become a millionaire after four months! DOES IT NOT SOUND TOO GOOD TO BE TRUE? For me, it is. Remember, my rule of the thumb is this: once it is too good to be true, then it is a scam.

If you still want to go an extra mile of probing, just ask yourself these questions: (1) If you were in his/her shoes of having a business venture that is capable of multiplying your money every month, do you think you will still need the money of other people to invest in your business? (2) Can you believe that he/she is far smarter than the owners of national giant companies such as Ayala, SM and Jollibee, for having the magic wand that turns your P100,000 into P1.6M after four months?

Two more acid tests: (1) Ask him/her for a notarized contract to oblige him/her to return your P200,000 after a month once you invest P100,000, and (2) Ask him/her to indicate the legal profile of his/her company in a public call for investors so that more investors could be able to invest. What do you think will be his/her answer to both tests – YES or NO?  

Having said this, why not finding time instead to learn yourself the various investment instruments such as (1) business, (2) real property, (3) mutual fund, and (4) stock market, among others? Regarding the stock market, you will find a list of shari’ah-compliant companies in the Philippines at website:

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