Introduction
Investment in most cases is defined to be an act of putting some money aside, or in use that could help in the days to come. Investments exist in many different kinds that one can choose from. It is advisable to look at the market to get to know what investment is appropriate to invest in. Additionally, the organization in which a person invests with the need to be known and have been in existence on the same field for a while. Signing or registering the agreement between the parties is another essential activity that any investor should ensure to do before the deal is sealed (Raymond, 2017). Watch out for the fake businesses, mostly operating online, who claim to do investments is also crucial more so in the current state in which technology is widely used.
Investing Behavior
There exist various types of investment that a person may settle for. However, a number of them may not be suitable for any investor and so, there is a need to know what investment you are going into (Jorgenson, 2009). To consider an investment, it is important that you go out and find to the market and get information about this. Though, the best kind of investment that most of the investors with limited knowledge go for is simple and safe securities. I as an investor with limited information about the market will go for the same to ensure that I have limited risks on the fluctuation nature of the market. This will specifically include recurring deposits and retirement scheme. This is because they are regarded as safe and do not more technical knowledge concerning the market; they will also ensure my continuous income even after retiring. This type of investment is not stressing nor demanding like others in the market. With the two investments, I do not need to change my profile even as my age changes as they are meant to be effective at an older age when the investor retires. The profile shows the financial advisor my interest and makes them able to know the type of investment I may be probably interested in or willing to invest on. This way, the investment advisor is given easy time and possible topics of investments to talk about so that investment type can be decided upon smoothly.
Recognizing Fraud
A pyramid is a model of a business that is unsustainable and works through the recruitment of more members who have various levels. They often give promises on the profit to be made as they continue to recruit members into the scheme. The recruits are then required to pay some cost while joining through which a promise for payment is made. Many people get lowered by such schemes and end up losing their upfront pay. I have got an encounter with such scenario though have never been a victim, that is no upfront pay was done. These pyramid schemes exist today, and they are even legal. Example of such a scheme is chain mail. These schemes often work on an enticing manner for their favor in which they get to win many people. Though, most of which do not remain active for a long period. This is because these pyramids are only stable as long as the lower levels continue to flourish and wider compared to the top levels. If the vice versa happens, the schemes collapse where in most cases goes away with people’s money. Its unsustainability nature is because it is fully dependent on those who invest, where if they reduce, these organizations are not able to continue existing as they are likely going to lose every money they have collected. People get deceived by the pyramids with the perception of getting rich faster which turns out to not be the case. Pyramid schemes have existed for a while now and are even illegal in some parts of the world. They are not easy to notice since they use networking strategies where the existing party influences new parties. It is just important for every investor to monitor closely how a firm runs before putting their money to invest. Below is a diagram illustrating the dynamics of pyramid schemes:
https://www.Journals.com/thmb/QyZR756P-VNi61BZdOjD8e3X1o8=/300×0/filters:no_upscale():max_bytes(150000):strip_icc():format(webp)/042104_1-5c0592c0c9e77c0001d6a2d4
Famous Scandals
Madoff’s scheme is one of the famous scandals that was registered for the past ten years ago. The scheme operation began in the 1980s and came to an end in 2008 when Madoff, the founder was arrested. His arrest resulted from him telling his children, Mark and Andrew the truth of what his business was doing and that the business was going down. Mark and Andrew immediately reported him to the authorities after which Madoff was arrested. This, however, happened when many had been affected by this scheme. An example is Michael Bienes and Frank Avellino who gave their clients to the Madoff business without being registered in their agreements. Because of this, the two were accused of being selling securities illegally. Madoff did not take any action on this matter, and therefore, Bienes and Frank paid fine of the allegation and were forced to close down their businesses (Kara, 2009).
With many investors joining the Madoff business with their motive, Ezra Merkin, an investment expert helped Madoff to get more money from the clients. Ezra later claimed that he had an interest in the Madoff’s company. This made Madoff succeed even more. Frank also got into many money laundering activities internationally just to benefit the Madoff’s business. Madoff continued with his business closely helped by his family who became part of the business in the late 1980s without being suspected by the Securities and Exchange Commission. With the ability that the Security and Exchange Commission has, the expectation that they would get to know of the Madoff dealings before it was too late was high. This was, however, the case. This is said to be because the Security and Exchange Commission ignored any doubts that were said about Madoff giving him schemes for about ten years (Steven et al., 2005). After this, the suspicions were realized, and Madoff also had the dilemma of paying the clients and investors. There was nothing left but to turn himself in.
Conclusion
Investment is an act that many embraces and are often up for. However, it is so difficult to know who is true and who is not in the current market. Several firms are coming up with the same idea of investing most of which get lost with the clients’ money. It is therefore recommended to be careful of who to invest with but most of all, get to know and monitor how they operate before investing.