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A Malaysian Guide to the Dangers of Foreign Investment

BY Team Loanstreet

Updated 19 Oct 2018

Everyone always tells you that you have go into investment to strike it rich, right? Invest today, earn a return on your investment in the future. Become a real estate tycoon! Or invest in stocks and make it big! People who are bitten by the investment bug often try to seek out the perfect investment, even if it comes from foreign shores. Be warned, however, as foreign investments can be a dangerous proposition.

If you suddenly find yourself being given an offer to take on a foreign investment, don’t be too hasty. It might be a scam, or you might be being sold a below-par investment. Below are three things you should always look at to confirm the legitimacy of any potential deal offered to you.

What's covered in this article?

1. Look at the source of the investment offer

The source of the offer can tell you a lot about whether or not it’s something you should take seriously or avoid entirely.

Indicators to look out for:

  • It comes from a cold call
  • The person addresses himself/herself as financial advisors/ or sales agents
  • The person making the offer calls you repeatedly
  • Claims they are independent but insist on a specific investment option

Measures to protect yourself:

  • Insist to check for the person’s license to verify his or her authenticity. If these individuals are from overseas, they may claim that they do not need a Malaysian Financial Services licence or that that they are approved by a real government regulator or affiliated with a genuine company. Never take this as an acceptable answer. If they cannot provide proof of their legitimacy, simply walk away. It’s better to play it safe than to lose all your money in a trap that you can’t break out of.
  • Never provide them with any of your personal details if you are even remotely unsure of their legitimacy. When it comes to this kind of thing, it always pays to be thorough.

2) Look at the company offering the investment option:

Indicators to look out for:

  • It is allegedly a diversified company offering products/services which are seemingly very advanced or unusual
  • It is an established foreign company but it funds its activities entirely with investor’s money, without using any debt financing (loans).

Measures to protect yourself:

  • Check whether it is linked to a chain of other companies with little or non-existent details. If this is true, then the company is operating under shell corporations and there are high chance that any money you give them may disappear without a trace.
  • Research about the company’s reputation on the internet. If it is indeed a company with any credibility, you should be able to find mentions of it on news portals or blogs. First, check if you can find any news or information about the company. Then, check if it has any bankruptcy issues or legal complications and how long it has existed in the market. The more info you can find, the better.
  • Also, if you can, do some research on the individuals controlling the company, namely the CEO, Managing Director and Chairman. If any of them have attracted the attention of investigators more than once then their marketing claims do not hold water. Of course, that is assuming that you can even find out which people exactly ‘run’ the company. It’s not uncommon for scammers to simply invent fictional people to add a sheen of credibility to their offers.

3) Look at the investment product being offered

Indicators to look out for:

  • The product is a supposedly low risk high return investment with a seemingly over-optimistic valuation.
  • They over-enthusiastically promote and encourage you to invest in a company that they predict is about to increase in value. The message will seem like an inside tip and they will stress that you need to act quickly. Be extra wary if this is the case.
  • Investment seminars used for promotion of certain investment instruments by charsimatic motivational speakers, investment experts, or self-made millionaires who will give you expert advice on investing, but seem to nudge you toward a certain investment instead of being fully independent.

Measures to protect yourself:

  • Calculate the returns and costs to evaluate if any of the huge numbers being bandied about make any sense. Any return of more than 20% per annum should warrant deep scrutiny.

  • Check their annual reports to calculate whether they have enough paid up capital to cover their investment cost in case of default

  • Assess the amount of debt or leverage of the company.

  • Check whether the investment product breaches any state or country law or intends to jump over loopholes related to your investment

  • Check the legal agreement carefully to ensure you are not subject to double tax payment or bearing the risk of hidden complexities around charges

  • If you feel an offer to buy shares might be legitimate, always check the company's listing on the stock exchange for its current value and recent share performance.

  • Be careful to read between the lines and don’t get tricked by misleading financial jargon like ‘diversification’ and ‘momentum’. They’re words that are made to sound nice and convince you of how good an investment is, but always use your own considered judgment before making a decision.

  • Finally, determine whether or not there is a liquid market for the sale of your investment. Remember, the more exotic and specialised an investment is, the harder it will be to find someone to buy it


The purpose of this article is not to scare you off from making foreign investments. Certainly, in the right situation, foreign investments can bring with them the potential for great returns. However, it never hurts to be prepared, and we hope that this article will help you to avoid sub-par or even fraudulent investment offers!

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About the Author

Team Loanstreet

Run by a professional human-sized team, get resourceful tips & guides from our very own library of financial articles that can help improve your financial lifestyle & make a well-informed money decision. We strive to provide you with the best service in helping you to get the most out of that DUIT!


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