Ponzi Schemes

Recently we have heard about the biggest ponzi schemes in history. Bernard Madoff has become a household name but these types of scams have been happening for years. In fact, they are named after Charles Ponzi who envisioned and created a massive money making scheme in the early 1920s.
Here’s how they work: Investors are lured with promises of unique opportunities producing high returns, and for awhile they may get those returns. But what they don’t know is that their money is not really being invested in anything at all. The “interest” they receive is money being paid in by later investors. As long as more investors sign on, which they will because of word-of-mouth advertising about the “great returns,” everything seems fine. But since no real investments are being made, it can’t last long and ultimately collapses.
So what should you do to make sure you don’t get lured into one of these things? Do your research and ask questions! A true financial professional with legitimate investment opportunities will not only welcome your questions but they’ll have great answers to them as well. Here’s some things to keep in mind while considering an investment opportunity:

  • Check the product and the sales person. To make sure the product is registered and the person is licensed contact your state securities regulator. Visit www.nasaa.org.
  • Watch out for promises of high returns over a short term.
  • Don’t be pressured to act quickly. Be ready to say, “I’m not making a decision today.”

And like I’ve been saying all week…this is exactly why AARP and NASAA partnered up to create the Free Lunch Monitor program. Check it out and protect yourself and your community.