We all have heard about Saradha groups scandal in which common people were duped of their savings. Instead of getting the lofty and unrealistic returns that they were promised, they soon realized that they have been cheated. This is really very unfortunate. Below, I am going to tell about some characteristics of a ponzi schemes that should help common people to save themselves from these thugs:
- Ponzi schemes promise the moon because they don’t have any intention to deliver. Any scheme that promises to double your money in less than 5 years has the potential to destroy your money. There are no free lunches in the world. If you deposit your money in bank, it will approximately take 8-9 years to double. If you put your money in large diversified mutual fund , (there is no guarantee) your money should double in around 5 years. Anyone who guarantees doubling of money in less than five year is probably lying. Beware of such people.
- Ponzi scheme tend to promise risk-free return. After promising a high return, they second trick is to create an idea that the money is totally safe. You cant lose it. Remember, in financial markets, nothing is risk-free. Governments, banks have gone bankrupt in past. So, always remember, no investment proposition is risk-free in the world.
- Ponzi scheme attract you by their ease of investment. if you want to open a bank account, the bank will ask for address/id proof. If you want to invest in mutual funds, you have to fulfil KYC (Know your customer) requirement. Ponzi schemes do not insist on these requirements. They are just interested in your money and make it easy for you give your money. Remember, if anyone asks you to invest in an scheme and does not insist on details like your bank account, PAN card number, address or id proof, be very cautious in dealing with such person.
- Ponzi schemes target you through your acquaintance. Normally, most people invest in ponzi schemes through their friends, relatives etc. Problem is even your friends or relatives have little idea about the intention of the promoters of such schemes. They are themselves gullible people with limited knowledge about financial matters. You trust them and unfortunately they trust whatever they are asked to trust.
- No regulation and no track-record. Financial products are mostly regulated. Furthermore, there is a track record. If you invest in an existing mutual fund scheme, it has a track-record. If a mutual fund scheme is new, at least fund promoter has a track record. Investigate before you invest. It will save you lot of money.
Anything that is too good to be true is probably false,especially if it is a financial product. Always be wary of tall promises of high returns. Be safe.