October 3, 2014
What is a ponzi scheme? Why should you care? What can you do about it?
What is a ponzi scheme? Why should you care? What can you do about it?
A ponzi scheme is when someone tries to trick people out of there money by promising a fixed return thats not reasonable, the person takes the money in and pays some people with the new money, never actually making any investments, you can avoid them by not investing with individuals and avoiding any unrealistic promises.
Right again, Garrett. Let’s review.
A crook promises exaggerated returns to entice people to give him/her their money. Then, the crook has to find other people to fall for the same pitch so the new money can be used to pay the old “investors.” There is no actual investment going on. It is simply a game of cards that will come tumbling down at some point in the future when there is no more new money coming in. Here is an illustration that demonstrates the ponzi scheme:https://www.youtube.com/watch?v=VXRkfqw67GE.
So what can YOU do about it? Understand that no one can promise guaranteed returns above 6% (really more like 4%). If they do, they are either a crook or delusional (or a little bit of both). The way to stop the ponzi scheme is to eliminate the person being taken and that means educating yourself on how it works and how to avoid it.