Ponzi and pyramid schemes

Schemes that pay earlier investors with money from newer investors, often with rewards for recruiting people.

What it means

There is little or no real profit behind the payouts, so each level needs many more new people; when new money slows down, payouts stop and most members, who joined late, lose.

What to watch

Returns that do not depend on the market, bonuses or levels for bringing in new people, pressure to recruit friends, and withdrawals that get slower or are paused.

How Compass-Alpha uses it

Background only; not used in any figure on Compass-Alpha.