Ponzi Schemes – A Red Flag For The Investors To Look Out


Ponzi Schemes - A Red Flag For The Investors To Look Out

Investors always look forward to investing in such financial instruments that offer high returns. Greed is an emotion in investment that can lead investors to take wrong investment decisions. Some frauds exist in the society that misleads investors promising higher returns. Therefore, investor education is very important. Recently, many investors yearning for abnormal returns fell prey to Ponzi schemes and suffered huge losses.

Ponzi Schemes - A Red Flag For The Investors To Look Out
Ponzi Schemes – A Red Flag For The Investors To Look Out

Ponzi is an investment fraud that pays the existing investors by the funds collected from the new investors. The scheme organizers fool investors and introduce their schemes similar to mutual funds. In mutual funds, portfolio managers invest your pool of funds in securities, bonds, etc. and generate profits/losses subject to market movements. But, the Ponzi scheme organizers do not invest your funds to generate high returns. Instead of that, they pay them who had invested money earlier and the chain goes on and on. Scheme organizers take money from investors and earlier investors.

Identify Ponzi Scheme Organizers

Any attractive scheme promising assured high returns aren’t regulated by statutory authorities. Such investments are not registered under the state and do not provide any details of an investment. Also, the paperwork is fake and does not give any return to the investors. As you identify a Ponzi scheme organizer, it’s a warning sign. Hence, do not invest your money in any scheme unless you verify the details.

Abnormal High Returns – A Trap For Investors

Investor protection concerns have increased with time. In greed for higher returns, investors also look for shortcuts and lose their wealth in minutes. The fraud scheme organizers trap investors who are scared of the equity market and promise them assured returns. Senior citizens are the common targets and they are influenced to invest their retirement funds for fixed income returns.

With the rise of the internet, the scheme organizers have found an easy way to reach people by advertising online. People with long years of saving look for safe investment options for financial security. A lot of fraudsters exist in the market and they operate professionally to fool people and make them invest in their schemes. The state consistently warns citizens to be aware of such schemes and do not lose their wealth.

Too Good To Be True

Ponzi Schemes - A Red Flag For The Investors To Look Out
Ponzi Schemes – A Red Flag For The Investors To Look Out

All investments are not profitable. Investors need to understand that financial decision making is not easy. It requires good research and understanding of the market. Investors should always invest after consulting with a certified fund investor. Investment options such as fixed deposits, real estate, gold, mutual funds, and unit-linked insurance plans, etc. are the best options. Moreover, mutual funds also provide good returns to investors. Still, it is dependent upon the market movements.

When the scheme organizers promise outstanding returns which are too good to be true, it’s a warning sign. An investor must be alert and smart. They should remain updated with the kinds of frauds operating in the market to avoid any kind of loss. Senior citizens are soft targets as they are risk-averse and avoid investment in equity markets. The best way to stop the existence of such schemes is investor awareness and education. The efforts of the state can make investors aware and smart to choose regulated investment options.

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