HYIPs are programs which pool together the funds of their members to take advantage of investment opportunities, like stock trading and foreign exchange (FOREX) trading among others. These HYIPs attract funds from members (known as "deposits" or "principal") by promising high rates of interest payments, which explain why they are termed "High Yield Investment Programs". Naturally, the higher the promised interest rate, the higher the risk borne by the members. This is due to the fact that HYIPs pay off their members from the returns on their own investments. Therefore, it is possible for the payouts to exceed the HYIP's own returns, especially when the rate of interest payment is high. If such a situation persists, the closure of the program would be inevitable and members will stand to lose their principals.

Scams

A scam is a fraudulent business scheme and this is rampant among HYIPs. Some HYIP owners abuse the trust of their members by misrepresenting to them about their investment strategy, when they have NONE. Consequently, they will eventually run out of money to pay their members and most of them just disappear into cyberspace, along with members' hard earned money. Therefore, we hope to educate readers by offering our humble advices on minimizing the possibility of being cheated.

Ponzi Schemes

This is named after Charles Ponzi, an Italian who migrated to the United States and became one of the greatest swindlers in American history. His aliases include Charles Ponei, Charles P. Bianchi, and Carlo. By paying off initial investors with money obtained from the later investors, Charles Ponzi managed to swindle $15 million from 40,000 investors from 1919 to 1920. This is how the term 'Ponzi Scheme' was coined. You should be aware of the fact that some HYIPs are actually pure Ponzi Schemes.

My Advice

1. Never join any HYIP that pays more than 3% interest daily as it is next to impossible to afford such a high payout on a regular basis.

2. Always do a Due Diligence check on the program.

3. Listen to what fellow investors have to say about the program in the various hyip forums. Check if it has been paying its members.

4. Diversify your funds by making deposits in several reliable programs. This reduces the risk of loss you are bearing. Even if one program shuts down, you still have other programs as back-ups for you to recoup your losses from.

5. Determine the coherency of the program's investment strategy. See if the owners know what they are talking about and if they have a sound business plan.

6. It is not advisable to join a program that uses poor language on its website. If the program has thousands of dollars of deposits, they should be able to afford to spend a few hundred to hire a professional publicist, or at least someone with a decent command of English to instill confidence among investors.

7. Just because the program is paying does not mean they will continue to. Decide for yourself how long more the program can sustain and whether it is likely for you to make a profit.

8. Always read the FAQs and the terms of payment carefully. You may discover some terms which may put you in a very unfavourable position.

9. Invest only what you are prepared to lose. Expect the worst but hope for the best. Be conservative when calculating your profits. Do a scenario analysis. This will put you in the correct frame of mind when deciding the amount to deposit with a program.

10. Do not compound your interest until you have earned your deposit back. This reduces the likelihood of you losing money as some programs do not survive for long, especially those without sound business plans.

For searching new HYIPs always use any good HYIP monitor like http://www.thehyips.info/. This information prevents you from SCAM.