What is a Ponzi Scheme? It is a scheme that looks good at the surface with irresponsible motive behind. It is sweet in the beginning but end up bitter at the end.
Ponzi Scheme promises an above normal rate of return, but not so high as to be unbelievable. The setup is not transparent as to how the return is to be generated. The scheme will convince some investors first and the promised return will be given for a few or many periods. These investors will invest more, and bring along their friends and relatives. Typically, those earlier investors will earn. The later investors' investment will be used to give to the earlier investors. Until such time that the holes are too big to cover, or the ponzi scheme master is happy with the amount of money he is holding, he will just disappear, or change the scheme, or change the man behind the scheme.
Doesn't it sound familiar? Even direct selling is patterned this way. Maddoff is a famous example in 2008 in US.
Even though we perceive the US people more knowledgeable than us in Malaysia, they still fell prey to this kind of scheme. Be practical, the hard earn money when invested, must exercise due diligent. Otherwise, just leave it in Fixed Deposit. Though sound unintelligent, but better than falling prey to ponzi scheme.
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