Ponzi schemes are one of the biggest investment frauds ever known to man. Unfortunately, most people fall victim to them because of their haste to make lots of money in a very short time. A Ponzi scheme is any get-rich-quick pyramid scheme that promises you returns on your investment in very little time. They come in different forms with different rules depending on the creativity of the creators, but a few things are common with every single one. This article will show you how to identify a Ponzi scheme.
Abnormally High Returns
The first indicator of how to identify a Ponzi scheme is an abnormal high returns promised by the creators. The most obvious sign of any dishonest investment is the promise of bogus returns to investors, especially within a very short time. Trust me; no one wants to give you free money. They take advantage of your greed and sell the idea that you can make returns that no other conventional investment can give you. You should be wary of such “investments”. If it’s too good to be true, then you should probably flee.
Vague Business Model
Another means of how to identify a Ponzi scheme is vague business model. Ponzi Schemes do not have any viable business model and usually operate on a “Rob Peter to pay Paul” basis. They never generate any real income or profit and the only money in the system is money paid by people to people. An honest investment will show you what its products and services are and will clearly explain its revenue and profit model to investors.
The last indicator of how to identify a Ponzi scheme is a promise of guaranteed returns. The truth is, there is no investment with “guaranteed returns”. Even the safest of investments has some level of risk. It may be hard to resist but you need to stay away from anyone or anything that gives you 100% assurance of returns and tells you that an investment has zero risks.
As enticing as they may sound, Ponzi’s are not good for you neither are they in your best interest. They ALWAYS crash. The best way to make money and create sustainable wealth is by investing in well planned, well-researched businesses that have stood the test of time.