4 Ways To Know If An Investment Is A Ponzi Scheme

4 Ways To Know If An Investment Is A Ponzi Scheme 

Now more than ever, the need to diversify your income and have investments is at an all-time high and maybe your friend/relative or acquaintance has told you about a great investment that yields high returns and you’re almost convinced it would be unwise to miss out on what looks like an opportunity of a lifetime right?

However, you need to pause and do a double take to ensure you’re not getting into a Ponzi scheme. But, what even is a Ponzi scheme? They’re a fraudulent investment scheme that claims to pay high-interest rates on investments but in the actual sense, they take the deposits of new investors to pay earlier investors and if there are more investors, the cycle continues. So basically, Peter is being robbed to  pay Paul

Ponzi schemes usually have the semblance of a legitimate business to confuse and deceive investors. So, just before you dole out your savings to this “great investment”, let’s ensure you’re doing due diligence and not throwing your hard-earned cash into an abyss.

First, ensure the business ticks the right boxes. That is, check if they’re registered with the Corporate Affairs Commission (CAC), and Security and Exchange Commission (SEC) Are they in compliance with the Ministry of Finance, and is the money you’re investing insured by the Nigerian Deposit Insurance Corporation (NDIC)? If all these don’t check out, why bother?

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Next is the juicy interest rate that was promised to loop you in. The only way for Ponzi schemes to survive is if they get new investors and sometimes as humans whose needs are insatiable, an investment offering 40% interest and above would be too good to pass up on. Typical investments usually fluctuate with the market and as a general rule, your investment risk should increase the higher your returns.

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Find out where the money will be invested in. Is it Agric? Tech? Energy? etc. Read up on the sector where the money claims to be invested in or have a financial advisor research it to make informed decisions. And, if you don’t even know at all, but just going with the flow of “they asked us to put money in this investment”, run o! So you mean someone will just be dashing you money every month? Do better dear!

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Finally, trust but verify. To avoid stories that touch, research people who have invested with the company in the past. The internet is your best friend; if it even slightly smells like a rat, trust that someone on the internet has dropped a review or two. You work hard for your money and it must be protected by all means abeg!

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what other ways can you tell if an investment is inauthentic or not? Share with us in the comments

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