How to avoid financial pyramid schemes?
Some people are looking for various solutions to extract money from others in any way, acting on the edge of the law. For some people, such individuals will be considered entrepreneurial. In the eyes of others, they are just ordinary scammers, because they want to get into our wallets in a very thoughtful way. One example of such clearly negative financial mechanisms will be a pyramid scheme. This phenomenon has been known for many decades in various countries, including Poland. Therefore, the most important thing for us will be to be able to protect ourselves against such threats. To understand such a mechanism, the easiest way is to imagine a structure that is based on the basic assumption that profits at higher levels will depend on the profits that are earned by others at lower levels.
What mechanism is the financial pyramid based on?
In principle, the mechanism with which we are dealing here is not very complicated. The financial pyramid will be based on the highest possible increase in people who pay money. In other words, the key task is to encourage more people to participate in such a project. Each next person also has the same task and is to acquire a few more willing donors. They, in turn, attract other donors. In this way, the people at the top of the pyramid get the highest profits. Of course, the smaller the position in the whole structure, the lower the chances of profits will be.
- The functioning of the pyramid can be listed:
- project promotion
- attracting new participants
- motivation of new participants to attract new ones
- discouraging withdrawals – withdrawals will cause the system to collapse
- financial pyramids are based on naivety
In fact, projects of this type are very optimistic, especially for people who do not have much knowledge of financial mechanisms. People who agree to take part in such a project are simply not aware that they are being used and that they are very naive. It is thanks to them that the system can work. That is why the initiators of such mechanisms are so committed to encouraging their projects and swearing that you can actually make money on it and that the whole financial game has nothing to do with dishonesty. This constant encouragement, very characteristic of pyramid schemes, and the provision of training is crucial, as this quasi-optimism is designed to block potential withdrawals. The more money is paid out, the faster the whole pyramid can collapse.
Quick recognition of a financial pyramid
Financial pyramid schemes take many forms, and they can even be elite mutual funds. Such projects can also be addressed to individuals, because it can be an offer of work at home, which offers very high earnings. It will always be alarming to require an entry fee. Manipulation techniques are also used and that is why many people are able to believe, because they believe that a specific action is the most logical.