It’s harder to find a solid avenue to invest your money in than it is to fall for an investment scam these days. In fact, some of the most dubious investments have become important events in history, including the Ponzi scheme, named after Charles Ponzi, whose famous pyramid scheme worked based on a guarantee of a 50% profit on an investment in only 45 days, which initially succeeded, but only because it was feeding off of itself by means of the most recent investors funding those who had already paid in. By 1920, the scheme could no longer sustain itself, and several banks and all of those who had invested were left with nothing or very little to recover from what they had invested at the beginning. Ponzi was sentenced to only five years in prison for taking the financial security and well-being of all who invested.
The biggest Ponzi scheme in history is still fresh in the minds of everyone. Bernard Madoff’s Ponzi scheme came to light by his own admission in 2008 once investors began to feel the heat of what would become The Great Recession. His inability to cash out his investors led to the financial ruin of investors across the board, with a grand total of $65 billion in losses.
Both of these examples prove how important the process of due diligence as well as simple common sense is to being a wise investor. The lesson here is to insist the statements providing information on an investment’s returns come from an objective third party.
As you can see, it is daunting trying to find reputable people to trust when you are trying to invest. Kenneth Lay and Jeffery Skilling provided inaccurate and misleading statements for Enron’s financial accounts. Initially their lies increased the worth of company shares, however, the stock collapsed once the deception was revealed, leaving thousands not only jobless but broke to boot.
Investing money is a risk along the lines of gambling, in actuality. The potential to lose money is just as if not greater than the potential of making money off of an investment, which makes investing something that needs to be done carefully and only after proper vetting of the fund, company, pr person you will be investing with. Avoiding investments is as if not more important than making investments. Just ask any of Bernie Madoff’s former investors. Make sure you are aware of how the game is played, in regards to fees and trading costs. Always look for so-called hidden costs and read the fine print as well.
If you are a small investor, or just starting out, it doesn’t hurt to spread your money around in order to experience different situations, and additionally you may even see a small but inspiring return on your money.
Historical Financial Scams Credit Picture License: B Rosen via photopin cc