When we discuss investment, we also need to get to know the ponzi scheme in investment. In the previous article (Research Before Starting Investment: Your First Investment), we also mentioned the Ponzi Scheme in Investment.
The Ponzi scheme is a fake investment. Ponzi schemes in investment pay profits from their own funds or pay profits from the owner of the order behind them. So, it doesn’t come from the advantage of running an investment by someone, team, or company. Therefore, this fake investment always needs fresh funds to fulfill the promise of return on investment.
We need to be familiar with Ponzi Schemes in Investment because they often appear in different packages. This type of fake investment often appears in different forms in various countries. The ease of investment applications through internet media will allow capital owners to access this fake investment in other places. Therefore, capital owners must be familiar with the Ponzi scheme in investment.
Ponzi Scheme in Investments That Harm Investors.
Ponzi scheme in investment always need fresh funds for new investors to pay profits to old investors. Therefore the Ponzi scheme in investment will persuade the owners of fresh funds by offering high profits. This fake investment will offer a very high return on investment in the short term.
And this mechanism will form a repetitive circle. This is because the continuity of high returns from the Ponzi scheme will continue to require a steady stream of funds. This means that there needs to be an ever-increasing investment fund from new capital owners to keep this scheme going.
Ponzi Scheme -Time Bomb in Investment
Generally, countries have put in place rules to stop or prevent the emergence of Ponzi Schemes in investment. The government’s goal is to protect investors from losses due to this fake investment. The Ponzi scheme in this investment is actually like a time bomb. This is because the Ponzi scheme in investment will meet destruction.
The Ponzi scheme in investment will be a time bomb because:
Organizers will escape money from investors’ deposits, liquidity decreases as new investors diminish, external crises result in investors dancing to investment.
These adverse reasons are why you as an investor must be familiar with Ponzi schemes in investment. Hopefully, this article can help you prevent losses from this scheme.