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March 27, 2018

8 Effective Tips To Keep Yourself Away From Ponzi Schemes

Making money is one of the reasons why investors are attracted to the stock market. But, on the other hand, Ponzi schemes may entice individuals to earn something extra apart from the monthly salary. As the schemes become popular across the various regions of the country, the financial lives of investors are definitely at risk. So, so here are some tips to check for fraudulent schemes.

Higher Returns

You should actually read between the lines with the scheme is promising you higher returns. For instance, if you come across a jeweler that promises you as much as Rs. 26 lakh against an initial investment of Rs.13,000, then you should think twice before getting involved in the scheme. You might not perceive anything wrong, but you would be put up in a big risk.

Doubtful Business Model

If you have to go through the operations of the Ponzi scheme, then it could simply mean robbing one person after another. As the person makes an investment, he is promised with a reward only after he has recruited more members. Such scheme usually collapses as the promoters run away with the money. Therefore, it is important to go through the business model carefully before being a part of the network.

Unknown Company

Before going for a scheme, you should be sure about the company and its credibility. If that is not the case, then you would be investing your hard- earned money into an organization which you have never heard before. Therefore, before planning to invest, you should make sure that the company has a good track record, it has been making profits and has never been listed under scams. A step further, you could do some online research to gather information about the company as well as the scheme.

Reputation Of Promoters

Apart from a diligent research, you should always check the record of promoters. These should not only be involved in a fraud but also be confident in delivering promises. If you are unable to find information, then you should surf the internet. You check the social networking site to know about the person whom you are going to deal with.

Registration Requirements

If you are thinking to invest in a non-banking finance company, then the first step should be to check whether the organization is registered with the Reserve Bank of India. Moreover, even if the company is authorized to run the financial business, does not mean that the deposits are repaid on time. Do also keep in mind that the end NBFCs are not permitted to run the business by stating the name of RBI in any way.


Non-banking companies should always be recognized for a minimum investment grade credit rating. This has to be taken into consideration when such companies are ready to accept deposits. In case if that's not the situation, then it is quite risky to invest in such organizations.

Terms & Conditions

Before taking a final call, you should always go through the terms and conditions carefully. This would surely help you to know whether there are any hidden charges when someone receives the commission. Besides, understanding the terms can always drive away the confusion and rule out major discrepancies.

Don’t Be Hasty

Finally, you should check the reputation of the management team and every regulation before making an investment decision. Even though everything might be crystal clear, there is always a little risk of insolvency. Hence, if you eager to earn higher returns, then you should spend money only if you have saved something extra in your bank account.

In one of the cases, the regulator had found it tough to take any action since the group was not registered with the RBI. Therefore, it is better when the state government officials are proactive to control the consequences of the scam.