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By Brad Mills
Over the last couple of years we've seen online High Yield Investment Programs, or HYIPs, evolve. The transformation seems to have gone from under the table type of faceless facades, to more popular in-your-face complex fronts, making it difficult to determine if it's an illegal business or a legit opportunity.
The majority of HYIPs are ponzi schemes. A ponzi is defined by www.wikipedia.com as a "make money fast" scheme where participants buy into an investment scheme with the promise of a return on their investment. Early participants receive a return as new participants invest more money. Without any real product or service, the ponzi scheme will collapse when there are no longer enough new investments to cover the promised returns.
When I first came across HYIPs, it was pretty easy to tell if they were ponzis or not. However, now ponzis have taken on complex fronts that confuse your logic! Over just the last couple of months I've seen ponzis adapting the appearance of legitimate online businesses such as Traffic Exchanges, Paid To Read Email Programs, Real Estate Investment Groups & Forex Trading Websites!
This new breed of ponzi scheme can cause you to suspend your skepticism at the promise of making fast money. This also draws in a lot of unsuspecting people, people who would normally never go near a ponzi scheme. Pastors, housewives, even children can fall victim to the new breed of online ponzi scheme because of the appeal of making money fast in a seemingly legit business.
I would suggest that anyone who is investing in HYIPs should try their best to use common sense. If you see something that is paying a ridiculous return daily, weekly, monthly, or even annually - there is a good chance that it's a scam. If you invest $100 and are promised to receive a return of $150 - ask yourself, "how is that possible?" If you can't find an answer, or if the admin or support team can't give you an answer, there's a high chance you're investing in a ponzi scheme.
When you get down to it, even the legitimate, legal HYIPs are very risky, that's the nature of a High Yield. However, if you throw in the ponzi factor, then you know someone will be losing money in the long run.
Why do some HYIPs last so long, while some others last only a few days? That depends on a few key factors. The length of the investment term, the promised return percentage & the popularity of the program.
If a ponzi has an investment term of 100 days, it will last much longer than one with an investment term of 10 days. The reason is because the admin team has a full 100 days before they have to start paying out. This is the reason that Studio Traffic (which had a long investment term) lasted for over 2 years, while 12 Daily Pro (which had a short investment term) lasted for under a year.
Studio Traffic & 12 Daily Pro were the most popular HYIP ponzis, there hasn't been a program as successful as either of them. That popularity is directly related to the longevity of a ponzi. If new members don't grow by an exponential rate, the ponzi will collapse.
Most HYIPs rely on the fact the the majority of people are going to re-invest their money, instead of taking their profits and moving on. It's human nature to want more, so when you are paid once - you feel you've been proven it's not a scam, and you re-invest all the money to make more again. This 'strategy' allows true ponzis to operate longer because even though they have paid the members, the money is always 'in the cycle'.
Here are a few guidelines to follow when investing in HYIPs.
1) Only invest money you can afford to flush down the toilet.
2) Try to get in at the beginning if you can.
3) Always withdraw at least your initial investment and then play with profits.
If you follow these 3 simple guidelines, you should be fine. Alternatively, you could stay away from HYIPs altogether and join a respectable network marketing business. If you really want to make money online, but you don't want to risk your money, starting a home business, getting some training & working hard is the safer route.