What are hyips?

What are hyips?

There are two schools of thought of what the hyip market is. The most popular school of thought is that it is impossible for any business to earn the profit margins that would be necessary to pay such a high return on investment therefore hyips must be Ponzi schemes. If you can believe wikipedia, there is some debate to that premise; a Ponzi scheme is defined here . The minority school of thought is that the hyip market finances small Internet entities with a short-term business model that banks and other financial institutions could not and would not finance. As some would agree there is evidence that both schools of thought are correct to a certain extent. The question is should the majority opinion be so prevalent and the minority opinion so completely discounted?

Ponzi schemes ethical or unethical?

So a Ponzi scheme is an investment program that pays early investors with the money received from newer investors. If you believe the wikipedia definition above I am sure your opinion is that people investing in hyips are surely doing an unethical activity. There is another side of the story though. If you accept the premise that Ponzi schemes are an unethical activity then I argue that you must accept all Ponzi schemes are unethical.

Ethical Ponzi schemes

The first ethical Ponzi scheme that comes to mind is the social security system in the United States. If you’re an U.S citizen, contrary to the myth, there is no account with all the money you have paid into this program sitting in some account earning interest. The truth is that money has paid for the retirement of other people and social programs to help the poor. I have done extensive research and have not found one person who has ever cashed out their social security in one lump sum. Many would ague that the social security system is a Ponzi scheme. Social security fits all the criteria for a Ponzi scheme if your honest with yourself. Then we have the state sanctioned lotteries. Wall street bridge loans that finance Ideas and can only have certified investors, the list goes on and on of state sanctioned Ponzi schemes and legal so-called ethical Ponzi schemes. Some may wonder if the only difference between an ethical and unethical Ponzi scheme is whether or not a politician can use that money to buy votes.

Who gets hurt investing in Ponzi schemes?

Bernie Madoff ran the most recent famous Ponzi scheme; Bernie is also the number 1 selling Halloween mask this fall by the way. What is the difference between what Bernie did and the management of AIG and Merrill Lynch? Some would argue there is no difference except the United states congress had its retirement plans at AIG and Merrill lynch had many VIP accounts of notable law makers. The losers and the people who had to be bailed out had one thing in common, an investment portfolio with poor diversification. My argument is many investments could be defined as Ponzi schemes it just depends whether or not someone of power defines the project as ethical or unethical. As far as the person reading this article at this particular moment only you can make the distinction of whether or not what your doing is ethical or unethical.

The case could be made that Bernie might just be the fall guy for powerful people unwilling to admit they were greedy and made the mistake of investing their life savings without correct diversification. Sometimes the truth is a hard pill to swallow. Putting all of their life savings into one investment vehicle is a mistake and the person who made the investment has the responsibility for a bad result.

If you play the Wall Street game or the hyip game one thing you must understand is true diversification. If you’re asking yourself what is this guy talking about and what is true diversification? You might consider educating yourself. Sooner or later greedy pigs get slaughtered in any investment. There is the natural law of gravity and there is the financial law of diversification, you can defy both for a short time but sooner or later the end result is the same. You come crashing down.

My next post will go into detail the Minority school of thought of what hyips may be and what the market could be. I believe whether an investment is a Ponzi scheme or true investment with a business model, money can be made either way using sound investment strategies and the correct diversification principles.

Stump

Check out Stumps Monitoring pages to find great Ideas for your portfolio below

The Best Hyip -Programs that are over 300 days very likely they have a business Model

Top Hyip -Over 60 days with a great record

New Hyip- Have all the makings of a big winner

Money Hyip- Have your money back in less than 30 days