HYIPs - Legitimate Alternative To Stock Trading?

Successful traders on the stock exchange markets are no strangers to the “educated guess”. They analyze risks related to a company's stock and then they come to a decision. When their decision is correct they earn a profit. But if they are wrong in their decision they will lose money. Investors who continue losing money will sell their stock to recap their investment. This ultimately means they stop investing in that company and they move on to the next one that looks promising.

You may believe it or not but stocks are not the only way the investor uses this same strategy to make money. People making money with high yield investments (HYIP) operate according to this principle. In order to fully understand the comparison, it's first important to first understand:

1. What is an HYIP?
2. How does a legitimate HYIP function? and
3. How do people invest in HYIP?

In this article we’re going to discuss and answer each of these questions in more detail …

What Is An HYIP?

HYIPs are investment programs offering high returns quickly. Just like stock trading, the more you invest the more gains you may receive. However, unlike stocks HYIPs offer more of a return for a smaller investment. The reason why HYIPs are able to offer this is because some of the money is funded from new membership. However, HYIPs that last do NOT and CANNOT function with new member money alone. They must have other legitimate methods of generating revenue. If they don't, the HYIP is really a Ponzi scheme and will eventually collapse. This will be discussed in more detail later in this article.

There are two types of HYIPs that are popular online:
- Those that require a person to do nothing but just invest, and
- Those that require an individual to view advertisements.
The latter has gained more popularity through a concept known as the ‘autosurf’. Autosurfs that are HYIP-based operate according to the same principle as television does; i.e. by offering members something 'free' for viewing advertisements. In this case the freebie is money. If the autosurf is not HYIP-based, it will offer advertising credits for its members. The more credits a member receives, the more they can advertise their sites.

How Does A Legitimate HYIP Work?

Unfortunately, due to greedy, unscrupulous people, a large proportion of existing HYIPs are scams. This is particularly the case with HYIPs which are not based on advertising revenue, although there are shady autosurfs out there too. However the chief reason why HYIPs not based on advertising are more dangerous is because there is even less certainty as to where and how funds are being generated. At least with advertising-based HYIPs one can usually see that they are selling advertising, whether through an 'Advertise on our site' link at the bottom of their web site or even an Ebay auction. However, the HYIP not based on advertising usually won't make it clear how they are generating income streams. If they don't have some fluff about making money through Forex or other legitimate trading methods, they may have the audacity to say they are a ponzi. Whether they say it or not, if they don't have other ways of making income they are nothing more than a ponzi. Consequently this means that the only way they are generating funds are through new member signups. When new members stop joining the scheme the program collapses. This is assuming the owner is 'honest' enough to let it run that long. Sometimes individuals using the ponzi scheme will let it run for a few months, then after getting a healthy build-up of member investments, they flee with the money.

Okay, so keeping all this in mind. How can you distinguish the legitimate HYIP from the typical HYIP which is a scam? Below are some common factors for legitimate HYIPs.

1. Legitimate HYIP sites usually generate revenue from a variety of sources.
Member signups alone are not enough to keep a legitimate HYIP running. That’s because when new members stop signing up .- which is inevitable even for established membership-based businesses - the HYIP's revenue source is gone. So if an HYIP is legitimate, it must sell a service or product or invest in stable trades for real.

2. Legitimate HYIP business owners provide bona fide addresses and can be contacted. HYIP business owners who are serious about their business will treat it as such. This means they will establish a company just like any other entrepreneur and they will reveal their contact information. If an HYIP webmaster can give no verifiable information about their 'company' including telephone numbers, they are scams.

3. Legitimate HYIPs receive positive feedback. HYIP monitors are sites which evaluate HYIPs. If they pay then they will receive a positive rating. If not, they receive negative ratings. Legitimate HYIPs tend to get mostly positive ratings through HYIP monitors. Legitimate HYIPs also receive positive feedback virtually anywhere on the web, even those not related to investing.

How Do People Invest In HYIPs?

The best way to invest in an HYIP is to start small and risk only what you can really afford. Risk is the operative word because there is no way for you to know whether or not an HYIP is legitimate until one actually starts investing. However, the risk tends to be worth it if the investor thinks the HYIP is legitimate because the return can incredibly high.

Once investors find HYIPs that are legitimate, they try to recover their initial investment as quickly as possible. After that, they invest using their profits only. Therefore the risk of losing is minimized. If something does happen to the HYIP it doesn't matter as much because they were playing with just their profits anyway.

Indeed, the HYIP game really is not be for every investor. Basically you should not touch HYIPs if you cannot afford to lose all your investment. But if you can afford it and you want a high return quickly and are excellent at risk assessment, it can be an excellent investment alternative. And believe it or not, there are thousands if not millions who have made money via HYIPs, despite the number of them that are shady. So while there is a risk of loss - also present for conventional trading methods - investors continue using HYIPs because the gain can be great.

Article Source: http://www.debtfinancearticles.com.

About the Author:
Elliott Dawson is a contributing real estate editor at http://www.debtfinancearticles.com/. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.