Imagine how you might feel if you had entrusted all of your hard earned savings into a high-stakes investment, just to find out later that you had lost it all and had been taken advantage of! Well, that is exactly the sort of thing that often happens with a Ponzi scheme! But what exactly is a ponzi scheme and how can you avoid being duped by this dishonest business practice?
The Ponzi Scheme Definition:
A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by later investors rather than from actual earned revenue. The scheme is named after Charles Ponzi, who became famous for using this technique in the 1920s. He paid investors 50% interest on short-term investments with money from new investors. All the while, spending a good part of the incoming funds for personal purposes.
Ponzi did not invent the scheme, but his operation took in so much money that it was the first to become known throughout the United States. Years later, Ponzi Schemes are illegal but continue to operate on the “rob-Peter-to-pay-Paul” principle, as money from new investors is used to pay off the previous investors in a continuous and destructive cycle until the whole scheme eventually falls apart.
What to look for and how to avoid a Ponzi Scheme:
1- Ponzi Schemes are frauds and scams which often involve large sums of money and dishonest behaviour. If you notice anything about a person or business that seems misleading or deceitful, beware!
2- Be sure to analyze the risks and not just the rewards. Prepare for failure if the investment appears to be high-risk. Never invest all of your money and have a plan b! Be especially cautious if the business downplays or denies any risk!
3- Watch out for hype and stick with what you know. If the so-called business is unwilling to provide you with the information you need, steer clear. Stick with what you know. A reputable business will have nothing to hide!
4- Avoid the “rob Peter to pay Paul” situations. This is unacceptable and will always end with someone losing their money and the demise of the fraudulent business.
5- Always do your homework and research. Look for an honest and reputable online company that will provide you with all the necessary information and tools you need for peace of mind. Where you will be guided with the proper mentoring for financial freedom and success!