5 things to know about ponzi schemes

1) A Ponzi scheme is a fraudulent investment scheme with the intention 1of duping.

2) It offers high returns at low risk to gullible investors.

3) Ponzi fund investors give money to a portfolio manager who pays them back from the incoming funds contributed by newer investors.

4) The new investor funds are used to pay the earlier investor.

5) The crux of this scheme is getting a constant inflow of new investors and when there are no more new ones, the scheme falls apart.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)