What is Ponzi scheme and how to avoid it? - letsdiskuss
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Rohan Chauhan

Financial analyst (Mudra finance company) | Posted on | Share-Market-Finance

What is Ponzi scheme and how to avoid it?


Educator/ Work from home Search Engine Evaluator. | Posted on

Works with a promise of very high return to trap innocent public.

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Ponzi scheme is a scam or fraudulent investment scheme where the money being brought in by newer members is used to pay off the older investors. The Ponzi scheme owners persuade the gullible public to invest in their scheme and tempt them with a promise of high returns in a short period . The whole structure will collapse, if the investment is less and the inflow of money is nil. Then the scheme owners have to pay the money to their old investors. Usually when this happens, the Ponzi scheme owner will run away with the money collected from the investors.

Ponzi scheme got its name from Charles Ponzi, an Italian immigrant in US. During 1919 -1920s, he collected more than 15 million $ from 40,000 greedy individuals, promised them the return of double the amount in 90 days. After an investigation, the scheme was stopped. But the concept is going on till now.

Usually illiterate and poor people who are in need of huge money to run their family will only fall for these kind of schemes and frauds. If unbelievable or out of earth returns are promised by any person, then we should come to a conclusion that there is something fishy in it. In this world nothing is free. If we use our brain and think calmly for a minute, we will understand that how any one will return the double of the investment with in short period.

Even in real estate also this Ponzi scheme type scams are going on. So many real estate companies without their own money, are constructing buildings and promising the owners to hand over their house within 2 to 4 years. They are using the Ponzi technique to generate money for the construction. If they could not find more money their projects stops and there ends the dream of a middle class citizen to own a house.

So be a responsible individual by verifying every fact before investing your hard earned money in anything .