The principle of the financial pyramid
After the closure of another investment site, many investors are upset to say that it was just a financial pyramid. However, not everyone knows what this term means.
What is a pyramid scheme?
A financial pyramid is an investment project that fulfills the obligations assigned to it solely at the expense of new financial receipts.
If an entrepreneur miscalculated with profitability and did not take into account possible risks, then the traditional structure of doing business easily develops into a pyramid.
This happens when the expenses of the enterprise prevail over income. In this case, it is not only not profitable, but also not able to pay for itself.
A businessman begins to take loans, only to pay off his own obligations. By such actions, it helps to increase debt. Soon, the number of payments on financial obligations exceeds the amount of cash receipts, so the pyramid collapses, and the businessman declares himself bankrupt.
Types of financial feasts
There are many types of financial pyramids. Consider the most popular ones:
- Layered. MLM-type. The number of participants in such a project should constantly double. The highest percentage is received by people who entered the pyramid in the early stages. The participants they invited will make a profit if they find two people each. Invited, in turn, must replenish the project with new people. Participants at the top of the pyramid receive a certain percentage of all who are located in the chain "under them."
- Pyramid according to the Ponzi scheme. The model owes the name to an enterprising Italian, Charles Ponzi. This person is the creator of the first financial pyramid in the United States. Here the gradation of investors on several levels is clearly traced. To gain profit, the participants of the first level did not need to invite new people to the project. The organizer pays for them with their own investments. Over time, payments were made at the expense of the participants of the second level, the second at the expense of the third, etc. For the normal functioning of the pyramid requires constant financial income. After all, it can not pay more than it invested in it, because it does not conduct any real activity.
When the organizer notices that the flow of funds does not show the proper dynamics or decides that his project has collected enough, he closes it. This is the collapse of the financial pyramid. The organizer appropriates funds and disappears in an unknown direction.
Under the Ponzi scheme, most modern financial pyramids work.
Summing up, it is necessary to say that any user can earn a substantial profit if he does not hope for good luck, but will carry out a thorough analysis of the investment project.
Only those users who know and understand the structure of the functioning of the pyramid, can always remain in good profit.
Should not give in to emotions and excitement. Do not rely on good luck. Otherwise, you risk losing everything.
Join the pyramid only in a sober mind and with cold calculation. Only in this way can you always stay in profit and turn investments into a permanent form of income.