5 ways to avoid Ponzi schemes and investment frauds

5 ways to avoid Ponzi schemes and investment frauds

The financial sector in Ghana has become somewhat shaky in recent months, following the emergence of many Ponzi schemes.

Initially it was the banking sector that had a lot of insolvent institutions collapsing, however, many Ghanaians have since fallen victim for investment frauds.

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.

5 ways to avoid Ponzi schemes and investment frauds

5 ways to avoid Ponzi schemes and investment frauds. Source: Starrfmonline.com
Source: UGC

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In the last few months, many Ghanaians have complained of their monies being locked up after making wrong choices.

But there are simple ways to spot a Ponzi scheme or investment frauds. So, before you invest your money, look out for these five things:

1.      Look out for unreasonable investment returns

Yes, investments are aimed at gaining some extra cash on top of your original deposit, however, you must be worried if the returns are too high.

If you realise that the investment keeps yielding higher returns, then you must suspect it to be a Ponzi scheme.

Take risks, but make sure they are calculated and do not let greed lead you into any investment.

2.      Consistent returns

No genuine investment gives its customers consistent returns, and every investor must note this point.

Investment values tend to go up and down over time, especially those offering potentially high returns

Therefore, once you realise your investment is yielding overly consistent returns, then it is definitely time to think twice.

3.      Look out for unregistered investment firms

Another simple way to spot a Ponzi scheme or investment fraud is to verify if the said institution is duly registered.

If it is, fine. But if it is not, then you have every cause to worry about your investment with the firm.

State securities laws require investment professionals and their firms to be licensed or registered. Once it is not, then it’s a Ponzi scheme.

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4.      Avoid secretive investments

Every genuine investment should be operated very openly and all of its products and services made easily accessible to the public.

Avoid investments that are secretive or which you do not have the totality of understanding in their dealings.

5.      Payment difficulties

Finally, every genuine investment must be able to pay its customers at any point in time when they show up for withdrawals.

You need to be suspicious if you do not receive a payment or have difficulty cashing out your investment.

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