How to Spot a Ponzi Scheme

From The Motley Fool, “A Ponzi scheme is one that depends on money from new investors to pay existing investors. It’s a scheme because the “investments” are not growing on their own because of savvy money management but because the one running the scheme is cleverly moving funds around behind a closed curtain. Once new money dries up, the schemer won’t be able to pay all the investors what they’ve been promised, and the whole thing will implode.

If you’re presented with any investment opportunity that’s described as offering very low risk and very high returns — or, worse, that’s “guaranteed” to deliver high returns, beware.

If you see returns that hardly vary at all, that should raise questions.

When you invest, you should want whatever you park your hard-earned dollars in to be an investment registered with the SEC or with state regulators.”

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