Be smart, don’t fall for a Ponzi

The latest financial scam in West Bengal (Saradha Chit Fund), where people lost money, proves just two points: There is still a lot of financial illiteracy; and those who are literate find it difficult to curb greed.

We can assume that some of the investors had no idea about anything other than bank deposits and were simply lured by high-profile selling tactics of the neighbourhood agent and lost their money. Surely, there will also be a large bunch, who were lured in to it by what they thought was “easy money.”

There are thousands of schemes floating out there that will leave you poorer. Whether it is a gold deposit scheme or a booking plan in some real estate project or a MLM scheme or a fixed deposit offering with fancy returns, each one of them is fraught with risks of the unknown.

Almost all of them have exhausted their legitimate ways of raising money and are banking on the gullible Indian to lend them money.

It is possible that a few of them may not have bad intentions. They may genuinely believe in their project, which may be dependent on too many things going right and exactly as per their expectations.

Let us do some logical thinking. If a bank deposit can give us, say, nine per cent per annum for a threeyear period, someone else cannot give us two or three percentage points more than that. If they are willing to offer you, say, 18 per cent per annum, it means that after all expenses, they should be able to earn more than that. There are very few businesses that earn this kind of money and those businesses are unlikely to need or borrow money. This has to be your starting point. Find out what they are going to do with the money they take from you.