HYIPs - Pros and Cons
Is a High Yield Investment Program a Get Rich Quick or Ponzi Scheme?
Mar 1, 2009
With interest rates at an all-time low, rising unemployment and financial difficulties on the increase, people are desperate to find a get rich scheme to ease any money worries. Whilst High Yield Investment Programs or HYIPs have always enjoyed popularity, even more are now ignoring the risks. Are HYIPs a Ponzi scheme or simply a high risk investment?
What are High Yield Investment Programs or HYIPs?
An HYIP claims to make investors high returns from investing in the foreign exchange markets, also known as FOREX trading. Investors are expected to deposit money from their egold account in order to participate in a HYIP. Some HYIPs promise to pay investors upwards of 6% per day. Based on a compounded interest and referrals, they are usually portrayed as a get rich quick scheme.
Advantages of HYIPs
- High yields. HYIPs usually promise to pay investors up to 6% per day. Whilst there is normally a minimum investment term, it is possible for people to invest for quick returns and benefit from a high yield in as little as 30 days;
- Compounded interest. Some High Yield Investment Programs or HYIPs allow investors to benefit from compounded interest, helping to achieve higher returns even quicker;
- Referral programs. The majority of HYIPs pay up to 15% for referring new members. Most referral programs have no limits in-terms of how many people can be referred;
- Simplicity. Once an investor has deposited money into their egold account, it is very straight-forward to deposit money. Most web sites are beautifully constructed and very user-friendly, seeking to explain different investment plans and returns offered;
- Accessibility. The minimum initial investment into an HYIP can be as small as £100. This makes HYIPs more accessible than other investments;
- Communities/forums. Investors in HYIP's enjoy being part of an online community.
Disadvantages of HYIPs
- Ponzi scheme.The overwhelming majority of HYIPs are little more than contemporary Ponzi schemes. A Ponzi scheme has nothing to do with FOREX trading. It simply uses new funds to pay existing members before the money is sent off-shore to be used by criminal organisations;
- Losses. Whilst it is possible to make short term gains from an HYIP, most investors get greedy and invest for too long. Investors not only lose their profits, they also lose their seed capital;
- Involvement of others. All Ponzi schemes are dependent upon referrals to bring in additional money to cover the high yields promised. This means that an investor encourages others to lose money;
- Unrealistically high yields. Even the few genuine HYIPs offer high yields that simply aren't sustainable. This leads to a position where they cannot pay investors or return capital. It can also be difficult to tell whether a legitimate investment mistake has been made or whether the HYIP is simply a Ponzi scheme trying to buy time to move money off-shore;
- No means of recovering money. Once money has been deposited into an HYIP there is no way of recovering money as it is paid-in using an egold account. It isn't possible to commence a chargeback as would be the case with an international wire transfer or credit card deposit.
Whilst everyone wants to get rich quick, if something sounds too good to be true, it usually is. An HYIP is, at the very least, a high risk investment, but at worst an online scam or Ponzi scheme. Whilst a few HYIPs may be genuine, the majority will use money from peoples' egold accounts to fund criminal activity, even organised crime. Even genuine HYIPs offer high yields that simply aren't sustainable.
Those seeking higher returns than from a savings account should consider a cash ISA or a stocks and shares ISA. These investments are both considerably safer than a HYIP or High Yield Investment Program. Always seek to make the most of tax-free savings, especially if a higher-rate tax payer.
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