Fundamentals behind the HYIPs

According to WiseGeek.com,

HYIP stands for High Yield Investment Program and is a way for people to invest money into high yield, high risk markets who couldn't normally do so on their own, usually because they lack the initial investment funds. A HYIP pools money from investors together and uses the funds to invest in these markets; investors receive a portion of the return on their investments over a pre-designated amount of time. Most HYIPs pay interest daily, weekly, or monthly over the Internet.

Now the question most HYIPs skeptics often ask is – what do they do with the money so pooled? Some bluntly termed all HYIPs - ponzi schemes and scams. Veteran HYIPs investors adopt this skeptical if not critical world view of HYIPs. Perhaps, this had kept many of them going, especially when they take a hit from the scams.

Beyond the attendant ‘professional’ skepticism of HYIPs investors, what exactly do HYIPs administrators claim they invest the money they pooled from investors in?

For starters, most HYIPs I have come across maintain they invest their funds in Forex Trading. Some claim that the experience of their staff in Forex Trading spans over a decade.  Some HYIPs site claim they deal with precious metals, while some yet claim they deal in diverse areas of investments.

Some of the claims are factual, while a lot of them are fictitious.  In reality, except in rare cases  most HYIPs investors really do not perform these ‘Fundamental Analysis’ as time and resources may not be adequate in verifying them. HYIP investors especially those with some background in FX Trading, simply conduct a form of Technical Analysis of the program, and take decision on this basis.

The fact that most HYIPS are not regulated also makes it difficult for such in-depth analysis of their claims. The inability to ascertain with degree of certainty the claims of the HYIPs led to the often touted golden rule: Never invest in HYIPs what you cannot afford to lose.


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