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Ponzi Schemes: How to Know and Avoid Them

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If we were to ask how many people here have heard of the term “Ponzi Scheme” in the past, most people here would have their hands up and the experiences of the past few days alone have redefined the way a lot of people look at money and literature. For those that might have not heard, in as simple terms as we can put it, a Ponzi scheme is one that involve a business promoting itself as a high yield investment programme, promising high interest rates when in actual fact, is just paying investors with money from other investors. For those that like to use idioms here, we can better explain what a Ponzi scheme is to you in five words – Robbing Peter to pay Paul – and that’s just what it is.

Originating from Russia and named after a man who bore the name Ponzi, this kind of scheme has caused nothing but pains, tears and gnashing of teeth in everywhere that it has been practiced. It has caused a lot of people to lose their money and even more to lose their lives – both literally and figuratively – and that makes it important for us as investors to keep abreast with latest trends and arm ourselves with information. Going to the main discussion for today, how can one identify these Ponzi schemes from legit investments?

1. They have no product line
From the gospel that we have always preached here, all we have been asking is that you create a business where you would be able to offer a certain kind of goods or services for money. The first sign that a business is a Ponzi scheme is that it has no services to offer, yet it asks you to invest and get interests. Removing greed form the table, the first question you should ask yourself is how they wish to generate the money used in paying interest if they are not selling anything.

2. Prescience of a central account
While some of those that are around these days have managed to find a way around the central account issue, most of them out there still have this old trick up their sleeves and it works for many. What they have you do is deposit your money in their account and they track how long you’ve been active for, after which they pay you the required amount and interest after some days – if they don’t decide to fold up first.

3. Lack of reasonable contact information
A business that does not have a base of operation should smell a rat to you and that should be where you draw the line. The advent of the internet has made our lives better, but it has even given these schemes something to hide behind as they can just use a screen to mask themselves while they collect your money and fail to pay you and in the end of it all, you would have no one to hold accountable for your losses. A legit business, emphasis on legit, should have a physical base of operations.

4. Official registration
Any company that requires you to make an investment in them should have at least been registered officially with the necessary bodies in your country. For a company to want to bypass this regulation is to means that they do not want to be bound by the law, and why else would someone not want that if they had a skeleton up their cupboards?

After reading this post, we would advise you to go check out a series of Ponzi schemes and see if all of these four do not apply to everyone of them. While we care about our investors making money, and a lot of it too, we also care about them not losing money. Have a blissful investment 2017.
please leave a comment and don't forget to add list of the ponzi schemes that people are falling victims of, thanks.

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