6 Things we can learn from Subrata Roy Sahara’s Arrest

A quick post in the aftermath of Subrata Roy’s , the Chairman of Sahara Group, arrest. 6 Things we can learn from Subrata Roy Sahara’s arrest :

  1. Companies with MLM model have hidden economics : MLM means Multi Level Marketing. MLM simply means if you make a downline or members for the Business under you; you will get a share of the profit as referral income. The more number of levels under you, the more referral income you will have. Companies who have MLM as their core policy; have hidden economics. An economics which is known only when the company starts to default or starts to fail to to pay those it has to pay.
  2. How companies with MLM model fail : As these companies use MLM to collect money to start big businesses. And in order to build such cash troves fast; they offer such referral bonuses and such interests on the money, which if not impossible, are difficult to sustain in long run, without encroaching on the bed fund or cash trove. Remember, even a brilliant business, the collected money is invested in, can’t grow beyond a certain level. And 9 out 10 businesses in this world fail.
  3. Companies with MLM as their model don’t have core expertise in any field : For a business to be successful, a company needs a few areas where it has expertise at. In the case of companies with a distinct MLM model, there’s no such area. And the basic premise is: Once one gets the money, one knows how to invest it.
  4. Companies working under with Financial Institution Licenses have bad debts and bad assets : Banks have a license to give loans to the individuals; While a Financial Institution can’t loan money to human beings, like you and I. That’s why FIs have to invest in land, or in stock markets. This many a times results in defaulters, stock market losses and below quality assets.
  5. Investor needs to think logically : The lure of interest can be big. But unrealistic interest rate or unrealistic income through downline is not easy to sustain in the long run. Hence, every investor must invest wisely.
  6. Never put “All your eggs in the same Basket” : Never invest all your hard earned money in the same fund or company. That apart, research every investment plan wisely before investing. Remember, even two very similar looking words like Surity and Assurance have different meanings.

To conclude, use your money wisely. Henry Ford once said : “Money is an Arm or a Leg, Use it Lose it”. But he never said, use it irresponsibly.