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From www.investopedia.com
"What Is A Pyramid Scheme? by Reem Heakal
A pyramid scheme is a fraudulent investing plan that has unfortunately cost many people worldwide their hard-earned savings. The concept behind the pyramid scheme is simple and should be easy to identify; however, it is often presented to potential investors in a disguised or slightly altered form. For this reason, it is important to not only understand how pyramid schemes work, but also to be familiar with the many different shapes and sizes they can take. (Many investors do not understand how to determine the level of risk their individual portfolios should bear. Find out for yourself in Determining Risk And The Risk Pyramid.)
The Scheme
As its name indicates, the pyramid scheme is structured like a pyramid. It starts with one person - the initial recruiter - who is on top, at the apex of the pyramid. This person recruits a second person, who is required to "invest" $100 which is paid to the initial recruiter. In order to make his or her money back, the new recruit must recruit more people under him or her, each of whom will also have to invest $100. If the recruit gets 10 more people to invest, this person will make $900 with just a $100 investment.
The 10 new people become recruiters and each one is in turn required to enlist an additional 10 people, resulting in a total of 100 more people. Each of those 100 new recruits is also obligated to pay $100 to the person who recruited him or her; recruiters get a profit of all of the money received minus the initial $100 paid to the person who recruited them. The process continues until the base of the pyramid is no longer strong enough to support the upper structure (meaning there are no more recruits). (From pyramid schemes to envelope stuffing, there are a lot of scams masquerading as legitimate part-time work. Read more in Recognize And Avoid "Work At Home" Scams.)
The Fraud
The problem is that the scheme cannot go on forever because there is a finite number of people who can join the scheme (even if all the people in the world join). People are deceived into believing that by giving money they will make more money ("with an investment of just $100, you will receive $900 in return"). But no wealth has been created; no product has been sold; no investment has been made; and no service has been provided.
The fraud lies in the fact that it is impossible for the cycle to sustain itself, so people will lose their money somewhere down the line. Those who are most vulnerable are those towards the bottom of the pyramid, where it becomes impossible to recruit the number of people required to pay off the previous layer of recruiters. This kind of fraud is illegal in the Unites States and most countries throughout the world. It is estimated that 90% of people who get involved in a pyramid scheme will lose their money. (Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably. Find out more in ETF Liquidity: Why It Matters.)
Fraud Disguised
Because people are attracted to the idea of making a quick buck with very little effort, many different forms of disguised pyramid schemes have succeeded in fooling people. Despite the illusion of legality presented by these revamped schemes, they are still illegal. It is thus important to recognize the characteristics of such so-called investment plans.
Many schemes will adopt the guise of gift-giving or loans that take place in investment clubs because none of these activities are technically illegal. However, the practice of donating a gift (tax free up to $10,000 in the U.S.) to someone (the recruiter), then having to recruit people into the club in order to receive a return on your investment (or your gift, rather) is essentially a pyramid scheme in disguise. (Joining an investment club isn't a get-rich-quick scheme, but it can help you learn the ropes or sharpen your investing skills. Learn more in Benefit From A Winning Investment Club.)
Multi-Level Marketing (MLM)
Legal multi-level marketing (MLM) involves being recruited in order to sell a product or service that actually has some inherent value. As a recruit, you can make a profit from the sales of the product or service, so you don't necessarily have to recruit more salespeople below you. And while you may be encouraged to recruit other salespeople whose sales would give you more profit, you can stick to just selling the product directly to the consumer if you choose.
A pyramid scheme MLM, however, will most likely sell a product with no independent value. The product could take the form of reports of some kind, for example, or mailing lists. In this kind of pyramid scheme, you would be required to recruit new members into the MLM in order to make a profit and keep the MLM alive. Joining the MLM is the only reason anyone would buy the products sold by this pyramid scheme.
Ponzi Schemes
Named after Charles Ponzi, who ran such a plot from 1919-1920, the Ponzi scheme is a fraudulent investment plan. It is not necessarily a pyramid, which is hierarchical. In a Ponzi scheme, there is one person who takes people's money as an "investment" and does not necessarily tell them how their returns will be generated. As such, the people's return on investment could be generated by anything; it could come from money taken from new investors - which means new investors essentially pay off the old investors - or even from money made by gambling in Las Vegas.
Chain Letters
Chain letters can be received electronically or through snail mail and are not illegal on their own. However, they take on the form of a pyramid scheme when the letter asks you to donate a certain amount of money (even just 5 cents) to the people on a list, then delete the name of the first person on the list, add your name, and forward the letter to a certain number of other people. The next people receiving the letter are then asked to do the same thing, so that you can receive your money as well. By forwarding the letter, you are asking people to give money with the promise of making money.
Conclusion
It is easy to see how a pyramid scheme can work, but participating in it (regardless of the form in which it is presented) involves deception and fraud because not everyone will receive the money that is promised in return.
As with any other investment plan you consider entering, it is important to ask the right questions. How will this money be invested? What is the rate of return? Who will be investing it? Talk to professionals and do your research before placing your money anywhere. And always remember that if a plan promises you'll get rich quick with no risk or doesn't tell you how your money will be invested, you should raise a red flag and exercise caution before getting on board.
and this to explain how Beachbody is NOT one:
WHAT THIS IS NOT... September 19, 2010 6:41 PM What is a Beachbody Coach? Is it one of those "pyramid" schemes?" My Coach shared this with our team and I wanted to pass her insights on to you...
Let's just start with.... What this is NOT..
Sales Pitch, Get Rich Scheme, Pyramid thing. We do not claim to have a MIRACLE cure, a MIRACLE device or a MIRACLE money making opportunity.
What we do guarantee is that if you DECIDE, regardless of fears and doubts.... and COMMIT (stay with it when the going gets tough) you WILL SUCCEED. Yes, it's gonna take some work, sweat and probably some tears as you say good bye to "comfortable" yet destructive behaviors... and that goes for both your fitness and your business. But I can guarantee you that you will not be alone in it. And it will be worth it.
As far as the pyramid scheme.... no it's not a get rich quick, BEG all your friends and family and hi-jack every stranger you see and invite them to some mysterious meeting where they get bombarded with some guys who want to know everyone you know. ICK.
Now.. let's be clear. We are set up as a MLM... but before you roll your eyes and delete me and block my Facebook.... take a minute to listen to what I'm going to tell you. We definitely not one to beg and drag anyone into this. This is a volunteer army on a mission to help people get physically and financially fit... physically fit being the emphasis. And it starts with yourself.
And I'm not sure how strong or where you are with your walk with God, but I'm in a better place than I ever have been.. and it's directly related to my relationships and the self-development I have undergone to become a better me, so bear with me here.
What we are about is really loving people. If you don't love people and have a desire to help them, then this is probably not for you. For me, it's my form of ministry and giving back for the second chances and the blessings that I have in my life.
I couldn't get past the "ick" factor knowing that this coaching opportunity was an MLM and the fact that in my mind, I had to "sell" something. I was like a lot of people and went around most of my adult life with a "bad taste" in my mouth about network marketing.
However... I had been using Beachbody products for a year. I had lost a lot of weight, increased my fitness, overcome depression and had basically did a 180 in my life.
I had a passion for the community because of the challenges that the people/customer had helped me overcome on my journey and not to mention the people I had inspired along the way as I lost my weight and helped them reach their goals. We didn't get paid for that. that was all because we wanted people to feel what we felt being healthy and fit... both physically and emotionally.
So I thank GOD every day that I did not listen to my "old" self. I had doubts about my own ability, had doubts about what my "friends and family were going to think" about me doing this, I had doubts about why anyone would listen to me (especially those that knew me) and I had doubts about how I was now going to EAT MY WORDS and become a..... *gasp"..... multi-level marketer after all those years of being so against it and anyone who was. (Seriously.. I was probably one of the most close-minded people you have even known.)
So what does a coach do? Well, we basically encourage and support and guide people who are ready to get healthy and fit. Unfortunately, there are billions of people who are searching for the answer.. being lied to and misled by people who are only wanting to make $$ off of them. It's sickening, really.
And it's getting worse. Not everyone can get to a gym, or can afford a trainer.. or would even go if they could afford it. there are a lot of people having to take their workouts home. Now we do not advocate working out to just DVD's..... not at all! We want people to get fit and healthy so they can go out and do all those things they've wanted to do... even better!
But we do have the answer for a lot of people. One of our programs, P90X is one of the best home programs ever. You have celebrities and professional athletes using it ... those guys can afford ANYONE and anything they wanted and they ordered an infomercial product.. because it works. Emmit Smith is one of them.... and it seems every day it's in the news talking about someone else. We don't pay them to say or do that. They are doing it on their own. But before it got all the publicity, regular people were using it and changing their lives. Me included. but we have programs from kids to seniors, from beginners to athletes....
Fitness professionals and doctors are joining up with us because it's just a cool concept... a unique way to help people who really need it who might not otherwise be able to get it.
How cool is it that we have a way to reach out to schools and have them join for free as a Non-Profit and give the kids a fun fitness option, but also a healthy fund raising tool? How nice is it that we have a program that helps someone with Type 2 with a step by step process to getting healthier and it was developed in conjunction with the ADA? How cool is it that more and more people are getting off medications, living fuller lives ... some even saving lives by being able to donate organs to loved ones after losing the weight..... and it's all done with old fashioned sweat and hard work... and support from a great community?
Nothing SNEAKY, or ICKY about what we do!!!
I figured out that I didn't have to be "icky". Not with Beachbody. I realized that just by doing what I was doing already.... sharing with others what worked for me, and then encouraging others in their own journey, that THAT is where the secret lies. That's all it's about. Leading by example.
I believed in the company, the products and when I thought about it, I was excited about the possibility of reaching out to so many people and help them reach goals they never dreamed they could reach.
We have an obesity epidemic in America and it's getting worse. We spend BILLIONS on weight loss products, but yet the crisis is growing... literally. People are DYING trying drastic things such as gastric bypass, diet pills and unhealthy DIETS. Yet it's not helping. More and more people are getting diagnosed with Type 2 Diabetes... and what's worse, what was once an adult onset lifestyle disease is now showing up in children.
Then we have the economy. Many have been forced some to quit the gym... or to get an extra job and they don't have time for a gym... and quite frankly, it's caused some people to just give up all together. Depression has set in and they just don't see a way out. They are working 2 and sometimes 3 jobs and still not making it.
The way I see it.. it's the PERFECT STORM.... and that goes either way.. either it will take you down with it...... or you can seize the opportunity to be a part of the solution.
YOU WILL HAVE TO DO THE WORK.. but the tools, the community, the products, the roadmap is here.... if you want it. If you really want it.
I wanted it bad enough to set aside my fears, my doubts, my old hang ups.....and most importantly.. my excuses... like not having enough time.... I work 2 days a week, have 4 kids, a husband and home to take care of. I didn't have time to do this.
Lack of money... although we made good money, we were in debt like most people!!
Lack of esteem..... why on earth would anyone want to go into business with me? But to have the opportunity to share something with others that had completely changed my life... well, how could I say no to that?
SO....
What it IS.. Opportunity to share a passion for fitness and a way to earn income just for helping others. We aren't just another MLM looking to just add "distributors". We want a team of people who are willing to live a healthy lifestyle and who want to help others do the same. It's that simple.
I don't care what your background is.... we have NASA Engineers, doctors, actors, stay at home moms, police, fire fighters, teachers, athletic coaches, even people who have been successful at other MLM loves this because it's "different". Boy is it ever. :)
I don't even care what your current fitness level is. Still haven't reached your goals? my best coaches were those who became coaches BEFORE they reached their goals and used it as an incentive to reach their goals... so that doesn't matter either.
An image of perfect health and fitness? Own a gym? Fitness Professional? We don't want to replace what you are doing... we want to help you help your current clients that you train, but also reach and help potentially thousands of people all over the United States... and soon Canada! It's about leveraging your time and helping more people in one hour than you could help in a week inside your 4 walls.
Oh man.. I'm sounding like an infomercial now! Ooops... sorry.. got way too side tracked here. But the point is... what I do can't be summed up in a sentence. And you can't really know what it's like until you're in it.
So take from this what you want. I do it because it changed my life. I do it because I've seen it change others. I do it because I don't want someone telling me when I can see my family and where I can take them on vacation. I was sick of missing out on "life".
I was sick of being stressed about money. I was sick of being fat. Life was passing me by as I sat and waited for some rescue boat that never came.
So I'm a Team Beachbody Coach, friend, mentor, leader, student....but more importantly, it helps me be a better mom, wife and most important a child of God.
And that's what it is to me.
By Krista 0 Comments coach coaching
http://teambeachbody.com/member/journal/-/journal-entry/Krista/72349314
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