MyMoney Online

Ponzi Schemes thrive in an ailing economy…

You get the sense that the increasing number of Ponzi Schemes (especially the latest MMM) mushrooming in South Africa is directly related to the financial pressures that are induced by our ailing economy. When there are large numbers of people struggling to make ends meet they become easy prey for the vultures circling them who take full advantage of the situation by promising outrageous returns which are nothing but lies and deception.

Robbing Peter to pay Paul A Ponzi

Scheme pays returns to early investors using capital from investors who join the scheme at a later stage. For example, you are promised a return of 20% per month on your investment of R10 000. At the end of the month your receive R2000 and you are so delighted that you tell family and friends. After all, you made a great investment decision, right? Meanwhile the scheme used your money to fund other investor returns giving you the idea that your R10 000 was invested for the next return. Now as your friends dive into the scheme their funds are used pay the R20% due to the existing investors including you. When you do the permutations, the scheme is destined to implode as the numbers of new investors required to prop up the existing ones simply run out.

Don’t get caught

Don’t get lulled into a ‘get rich quick’ promise. Sure, the higher the return you seek should be relative to higher risk but there are limits. When a guarantee is thrown in become suspicious. Spectacular guaranteed returns are too good to be true. Check if the organisation is licensed with the Financial Services Board as a Financial Services Provider. If it is then it will have a Licence Number. This is no guarantee, but at least you have some idea that the company has been approved. Ponzi Schemes can bye-pass the regulatory environment, so if no number then there is a reason to be more careful. Check out the company. Where is it based? How long has it been in business? What assets, products or services are they in the business of?

Get a second opinion. Ask a reputable financial advisor for advice. An experienced advisor will not be enticed by spectacular promises as he will understand that wealth is created over time. If the offer is extraordinary a good advisor will see the pitfalls.

For more information, listen to Paul Roelofse speaking to Sam and Africa on Weekend Breakfast below...

Read more from Paul Roelofse at www.investforlife.co.za

702 welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the 702 community a safe and welcoming space for all.

702 reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

702 is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
3 best investments in the world right now (by Mia Kruger)

3 best investments in the world right now (by Mia Kruger)

Hot tip alert! Mia Kruger of Kruger International Asset & Wealth Management shares her stock picks of the week on The Money Show.

3 JSE shares you should invest right now (by Momentum)

3 JSE shares you should invest right now (by Momentum)

Looking for a hot tip, or three? Here’s what Momentum Head of Investments and Savings Steven Schultz is buying...

Want to withdraw from your retirement fund? You’re not (even remotely) alone…

Want to withdraw from your retirement fund? You’re not (even remotely) alone…

The Money Show’s Bruce Whitfield interviews Galileo Capital Personal Financial Advisor Warren Ingram.

‘I’ll do it later’ – more wealth destroying than any market crash or recession

‘I’ll do it later’ – more wealth destroying than any market crash or recession

Personal Financial Advisor Warren Ingram discusses the extreme cost of procrastination and gives practical tips to overcome it.

How to get out of your Retirement Annuity (RA)

How to get out of your Retirement Annuity (RA)

RA not doing well? Perhaps its fees are too high? You don’t have to stick it out!

These 3 behemoths are the best investments on the JSE - Vestact Asset Management

These 3 behemoths are the best investments on the JSE - Vestact Asset Management

Portfolio Manager Michael Treherne on what he believes are the three hottest stocks right now.

Popular articles
It's not the end of the road... Top tips to improve your matric

It's not the end of the road... Top tips to improve your matric

"Recognise that it’s not the end, it’s the beginning." Expert advise for school-leavers who want to improve their results.

NSFAS to reopen 2017 applications

NSFAS to reopen 2017 applications

National Student Financial Aid Scheme says it will reopen 2017 loan applications after receiving requests for deadline extension.

Right now, these are the best shares to buy on the JSE (according to Adviceworx)

Right now, these are the best shares to buy on the JSE (according to Adviceworx)

Bruce Whitfield interviews a Portfolio Manager about what she believes are the hottest stocks right now.

5 advantages of leasing instead of owning a car (lower monthly payments!)

5 advantages of leasing instead of owning a car (lower monthly payments!)

Want (or need) a new car? Dale Scorer (a wealth manager at AlphaWealth) reckons you should consider leasing.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...

Blesserfinder: Matching you with a sugar daddy near you

Blesserfinder: Matching you with a sugar daddy near you

Is social trend Blesserfinder, where girls are allegedly matching up with rich 'benefactors' in exchange for sex, a real thing?

5 ways the NSFAS funding model will change in 2017

5 ways the NSFAS funding model will change in 2017

The National Student Financial Aid Scheme (NSFAS) will pilot a new funding model in 2017. NSFAS chairperson Sizwe Nxasana explains.