Woman involved in a ponzi scheme
There have been so many Ponzi schemes in the past decades that you’re bound to have heard of the concept by now. Some of the more popular ones were Geneva Gold, Gold Guarantee, and Sunshine Empire. A Ponzi scheme is a set-up where members pay a registration fee, and new members’ fees are used to pay the old members. Eventually, the scheme runs out of new people to sign, and everything comes tumbling down.
Being a victim of a Ponzi scheme can be a very painful experience because you have to watch your investments go up in flames in a very short time. Here are some things that can help you identify and avoid Ponzi schemes.
They are always masked as investment opportunities.
Obviously, nobody in their right mind will invest their money on something that’s painted as a Ponzi scheme. For schemes like these to really pull people in, they are disguised as incredible investment opportunities that are too good to miss. A great way to spot them is to look for the differences between them and traditional investment opportunities like stocks and real estate investments.
Although you can’t run away from every investment opportunity you come across, being cautious of the ones you buy into can give you enough time to conduct your research and unearth the truth about them. Another thing about these investment opportunities is that they try to get you to buy in as quickly as possible. Because these schemes never last very long, they always try to get as many people within as little time as possible.
You should always research any investment you want to get into. You can find a precious resource here. The website is called ReviewNerds, and it reviews some of the most popular investments opportunities and tells you whether they are worth it or not.
They have questionable income models.
For an investment to be truly valid, it must have a means of generating returns, and this is where most Ponzi schemes falter. All the well-known investments have a clear and easily recognizable way for its investors to make money. Real estate appreciates, and companies pay their shareholders dividends based on how many stocks they own.
A Ponzi scheme, on the other hand, generates income almost exclusively by robbing one person to pay the other. If you observe this kind of income model, it’s best to steer clear of such an establishment. Several multilevel marketing businesses generate income by referrals, but these sell products alongside. That way, the company continues to generate products, even if no new referrals are made. A Ponzi scheme, however, is much different.
There’s a rave about it.
This tip refers to bad decisions in general, although it certainly applies to Ponzi schemes. Usually, when there’s a lot of buzz about something, it’s because it’s flashy and attractive. Every savvy investor knows that by the time the general population understands the opportunity, the peak period has already passed. The same thing applies to these schemes.
By the time the general public hears about it, and everyone you know is telling you about it, the scheme is probably as big as it’s going to be. Beyond this, it will ‘run out of people’ and most likely crash down like a house of cards. If everyone is talking about a business you’ve never heard of, and you can’t get your head around how they make money besides the commissions of signing other people, don’t put your money in it.
For more of our great articles, check these out:
Source: Pexels.