Why Do People Succumb To Scams?

Yesterday I came to know one more incident of fraud. My friend Ramesh was duped into lakhs of Rupees in an online scam. He narrated his story to me. He was literally in tears. A few days ago, he received a WhatsApp message from an unknown number regarding an opportunity to earn additional income through a freelancing job. Though he has a job, it wasn’t a very high paying one. So he thought why not earn more by doing some online job? Hence he joined the group.

On the first day, for a petty task of liking some YouTube channels, they paid him Rs. 1000/-. He was excited. It was easy money. The next day, he was given another task and received Rs. 2000/-. This has increased his faith in that group. Without doing much physical or intellectual work, he was receiving money. He was thrilled.

After a few days, they introduced him to a trading platform. They influenced him by showing trading profits and narratives of other traders and how they are making money by trading. They lured him to trade into Bitcoin. He started trading as per their instructions. On the first trade itself, he invested Rs. 2000 and made a quick profit of Rs. 1000. He increased his bet to Rs. 5000 and got Rs. 10,000. Subsequently, after a few days, he made Rs. 20,000. It was a dream come true. Seeing money flowing into his bank account has increased his confidence. He took a loan of Rs.1 Lakh from his friend and kept on increasing the bet. On that trade, he lost almost all the money. To cover these losses, he took more loans and bet again. He kept on winning small amounts but losing big ones. Finally, he lost more than 5 Lakh rupees and suddenly he was thrown out of the trading platform and the WhatsApp group.

By now, it was too late. He realized that he was duped.

This is not the story of a single individual. Many are getting trapped in similar scams and losing hard-earned money. Sad, but true.

Why Do People Succumb To Scams?

The only reason is greed. Greed drives people crazy. They want quick money. They want more money. They want easy money. Everything boils down to human behavior. And when it comes to money, almost everyone goes mad. Poor, rich, educated, uneducated, young, mature. All prey to these scams. Greed overpowers rational thinking. When shown that extra buck, people are willing to do anything. They get lured easily with the hope of doubling the money. That is human nature.

Even in the stock market, people come with the hope that they will become rich overnight. They think the stock market is the easiest way to make quick money. That is the precise reason why so many people are getting attracted to options trading. The influencers on YouTube channels are enticing to trade in options as if it is a sure-shot recipe to become rich.

I know many who have lost lakhs of rupees in trading. And I know many who are still trying their luck. It is an endless pursuit, a hopeless dream. Very few can win this game. Data shows that less than 1% of people who trade, could make more than FD returns. It is that pathetic. Forget about making crores, it is extremely challenging to make sustainable profits.

But the unfortunate part of human behavior is that despite advising them repeatedly, people still indulge in trading. Despite being aware of such scams, people still get trapped. Even if we know that this path will lead to a cliff, still, we are eager to fall, hoping that our luck will bail us through. Everyone wants to try his luck. For them, luck becomes more prevalent than knowledge, skill, and handwork. Very few are willing to invest in these attributes. The majority still believe in destiny.

There is absolutely nothing wrong with having aspirations to become rich. But the harsh reality is that there is no "Make Me Rich" trading strategy or scheme in existence. The only attribute to becoming wealthy is necessary behavioral traits.

If you can earn decent returns of 10 to 12% per year, you must consider yourself lucky. If you desire more than this, then you are getting into the zone of greediness. And that is a dangerous sign. It is a psychological trap. Once you get sucked into it, it will drive you to financial disaster. This is the time to watch out for your thoughts carefully. The day you wish to have excess returns, and that too quickly, then you are wandering on the wrong path. There is a need to calm your mind, reframe your thought process, redefine your financial goals, and inculcate appropriate behavioral attributes.

Controlling your emotional behavior is the first sign of getting wiser and wealthier. If you are willing to wait and hang on there, irrespective of all odds, then the market will reward you handsomely. This is the psychological battle played against your mind. The one who plays it diligently wins it. And the one who wins, he never succumbs to greed. The one who never succumbs to greed will always emerge wiser and wealthier.

The Buddha preached, “It is better to conquer yourself than to win a thousand battles. Then the victory is yours.”