As you read this, many Zimbabweans are in tears. Thousands of them invested their hard earned savings in the popular Ponzi scheme called MMM, among them were civil servants, vendors and more.
However the scheme collapsed and many have subsequently lost thousands of dollars to the fraudulent online pyramid scheme.
The social financial network, which relied on an accelerating number of new members to pay off the old, abruptly terminated its services without any prior notice last week leaving participants stranded.
To avoid falling victim to such, here are some steps you should take:
1. Avoid greed
The reason why most people fall victim top such schemes is the fact that they are greedy. For example why would you invest in a scheme that promises you almost 50% returns on your original investment in a relatively short time.
So while it is good to dream big, if a scheme is too good, it most likely is. So do not let greed push you into doing something you will later regret.
2. Make inquiries
Questions like: What do i stand to lose? Who is the originator of this scheme? Is this legal? What are the likely risks? Are there positive reviews of the scheme? Questions like this will help you to determine if investing in the scheme will be a wise idea or not.
Ask objective people, not those who have already put too much into the scheme to be objective in their evaluations.
3. Do your research
While you can rely on people if you are sure that their evaluations are objective enough, you might need to conduct your own research. Google and Wikipedia are some of the best sources of such information. You should put them to good use.
Carrying out adequate research on your own, can stop you from making the costly mistake of trusting in another person and ending up losing your hard earned savings like the people in Zimbabwe.
4. Invest only if you understand
One key advice from top investors has been that you should never invest if you do not understand the business. Bill Gates and Aliko Dangote, two of the world's richest men repeat this advice regularly, so you should keep it in mind.
If an investment scheme seems too convoluted and complex, you should either take time to understand it properly or avoid investing in it totally.
5. Be wary of pyramid schemes
Pyramid investment schemes, that is investment schemes, where you are asked to put down some money and bring a certain number of people, who will in turn bring another set of people, which is also known as networking are highly risky.
In several cases, the pyramid falls over time and most people are left with heartbreak. So as a rule, it is better to avoid pyramid schemes entirely.
When investing in any scheme, paperwork is vital, it is especially important to see documents and agreements even when investing in a networking scheme.
Ask for signed agreements drawn up by a qualified lawyer, so that if anything goes wrong you can sue the organization to court. Also avoid organizations with no permanent office address and any not registered with the Corporate Affairs Commission (CAC).
Evangelizing is actually more of a sign that someone is out to profit from you at your expense, so be wary when someone begins to preach and persuade you to put your money somewhere. It may turn out to be a scam or a fraud.
The above list is not exhaustive, if you have any other tips that would help investors to be more careful, you are welcome to drop them in the comments below this post.