Recently, many companies have utilized the called “” practices with success while others applied the investment pyramid schemes. Consequently it is important to notice the differences between a legitimate multi-level marketing company and a simple pyramid scheme that apparently works.
First, you need to know that pyramid schemes always fail, although it seems that it’s working while multi-level marketing in sometimes survives.
What is a pyramid scheme?
A pyramid scheme is a fraudulent system that recruits new investors for making money based on the increasing money invested. So is called a “pyramid schemes” because the number of investors increases at each level. Finally, it is important to mention that sometimes pyramid schemes may involve the sale of products or services like gold, website traffic or just more money.
Why do pyramid schemes always fail?
Pyramid schemes are predestined to fail in all known cases because their success depends on the investors’ ability to recruit more investors but obviously there are a limited number of people in the world, and there are a fewer number that are really interested in this kind of business. That is the real reason why pyramid schemes will collapse eventually, and the only people who can make money (or don’t lose) are the few who remain on the top of the pyramid.
On the other hand, legitimate multi-level marketing companies can be around for a long time because involve sell solid and real products or services and participants are not subject to huge losses.
How can you avoid being defrauded? How to recognize them?
The easiest way is not to participate in any investment that seems to be a pyramid scheme. If you want to know what company works with this method you need to research about its officers, and its products or services.
Avoid promoters that tell you the best point of view about it; you should gather all information by other methods, like internet. If it is a success company it will appears everywhere, and many people will write and comment about it, if it’s a fraud you also will know. Also you need to find out if there is a huge or acceptable demand for the product or service offered.
Consider that if the company is new it will be more difficult to get the complete information but you always can read the company’s prospectus which is a legal document about the company.
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