Ponzi schemes By Kirsten rodgers

What is a Ponzi scheme? A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers will promise to invest your money and generate high returns with little or no risk, instead, they will never actually invest it and will often times keep the money for themselves.

How do people fall into Ponzi schemes? People hear the idea of high returns and low risk that they don’t feel like they should look deep into who and what they’re investing in. Often times the Ponzi organizer will make himself look or seem professional which can trick a lot of people into thinking it’s legit. The organizer might pressure you buy saying that the deals closing or that there’s only a few units left, therefore making it hard for the investor to find out more information about the investment.

Ponzi scheme red flags High return with little or no risk. Any investment will have risks so if it says no risk it’s mostly likely a Ponzi scheme. Overly consistent returns. Investments tend to go up and down, so look out for investments that regularly generates positive returns. Issues with paperwork. If there are any errors with the paperwork it could be an indicator that the funds are not being invested.

Ways to avoid a Ponzi scheme Make sure your adviser is legit. Dig deep Understand the difference between a manager and a custodian Be skeptical of pitches for exotic or obscure products

Ponzi schemes are bad Overall Ponzi schemes are bad because…. They will never actually invest your money They will give your money to earlier investors They will keep some of the money for themselves You will most likely never get money back from it

Watch out for Ponzi schemes!

Works cited Investor.gov Money.usnews.com Google images