The Truth Behind High Yield Investment Programs (HYIP)
The root of countless controversies, HYIPs or High Yield Investment Programs continue to thrive. A lot of people have learned from the experiences of others that such schemes are untrustworthy, but as economies continue to rise and fall, it is unavoidable that a lot of people are still lured by this networking investment schemes. HYIPs are, of course, unadvisable. There are more to HYIPs than meet the eye. Its very name, HYIP, carrying the word “investment”, is in itself, a deception.
An HYIP is a common form of the more popular terms, pyramid or networking schemes. HYIPs are often offered through the Internet. They require the investor to put in a minimum amount as an initial investment, and in exchange, they give large promises as to the returns the investor will receive. More HYIPs were caused by the upsurge in e-banking which makes online investments easier, now with practically no territorial boundaries.
Some HYIPs claim to offer absurdly high returns, which should be a clue as to how much truth may be behind it. HYIPs usually entice more people because of this, and even those who know better, sometimes even risks making a couple of investments due to the extremely large promises.
Looking closely, the idea behind HYIPs is very simple. It relies heavily on the pyramid or referral approach. The aim is to refer as much new investors as possible, but the money they put in is actually not, as is implied, an investment. It is merely used to pay off the expected returns of those higher up in the HYIP pyramid. This means that as long as there are new investors and new money, and old investors keep their money invested in hopes of more profits, the HYIP will survive. The so-called investments are not invested in any form of genuine income-generating business. The money simply goes around, and HYIPs typically fail when there are no referrals and no new money going around.
Another flaw behind the HYIP referral scheme is that investors would naturally refer their friends and families, which, of course, may consider the source reliable. The referrals may usually be done in good faith, since they have already truthfully earned the promised returns. Those making the referrals are also encouraged by the desire to make the HYIP last as long as it could, even if they somehow expect it to fail sooner or later. The longer the HYIP survived, the more they would earn, and the welfare of those they refer is usually not on top of their minds. The problem is that the investors most at risk are the investors at the lower rank of the pyramid. Referring a close friend or family member is like exposing them to a risk higher than the one you are exposed to. The higher up in the pyramid you are, the more your chances are of getting the high returns promised, but the same cannot be said for the investors in the lower part of the pyramid. There is also no way of knowing how high up in the HYIP you will be once you join.
In an effort to help answer the question whether HYIPs should be trusted or not, there are HYIP monitors popping up on the Web. These are sites that list existing HYIPs and rate them as “Paying” or “Not Paying”. The “Paying” status, of course, helps the HYIPs a lot. The aim is to help investors distinguish from trustworthy HYIPs and scams, although there may be underlying objectives. Here is the flaw in the system: the monitors charge the HYIPs for them to be listed on the site, they might as well be offering promotional services to the HYIPs. It is quite easy for them to pay extra just to keep the “Paying” status going, or to manipulate the ratings. Another problem is that monitors are extremely vulnerable to deceptive measures. They allow users to post their own comments or experiences regarding the HYIPs listed. The HYIPs can easily get people to post untruthful positive comments or use various IP addresses to disguise their own postings.
Given all these, it is dangerous business to go into something that involves financial investments, exceedingly high promises and vague explanations of the actual business. The thing is, as long as there are people willing to be taken in by HYIPs, there will be HYIPs going around, recruiting “investors”. It is a sick cycle, or rather, a pyramid that will just keep on growing. Thus, the best response would be to say “no”. However, for those who are willing to continue with the schemes, know how HYIPs really work from methods other than just the words of your recruiter, then proceed at your own risk.
