Wednesday, August 15, 2007

HYIP Investment Diversification

HYIP Investment Diversification

High Yield Investment programs usually involve in a variety of high risk and
volatile field of investment such as Forex trading, Stock exchange, Sports betting,
metal trading etc. There are also HYIPs that do not invest at all, scammers.
From these facts, you can easily realize that there is always a risk associated
with investment in HYIPs.

If you are not able to control these risks, you will lose your hard earned
money badly. For that reason, you should be able to implement a mechanism to
manage and minimize these risks to the smallest possible. The most effective
way of minimizing these risks is Diversification.

What is Diversification as applied to HYIPs?

Diversification is a technique that reduces the risk by spreading your portfolio
over many programs to avoid excessive risk imposed by HYIPs. In simple English
this means “ do not put all your eggs in one basket”.

There are certain issues you should consider on how to diversify you portofolio
over different programs. Let’s see these issues one by one:

Determining how many Programs You should have

Obviously diversifying over 10 programs is better than investing into 2 programs.
It is even better to have 20 programs instead of 10. But, it is hard to find
20 solid programs. There fore , The bottom line for diversification , as far
as HYIPs is concerned is that , you have to diversify you portfolio over researched
programs as maximum as possible. But, I want to clarify one thing; Diversification
does not mean spreading your portfolio over scam programs. Always make a diligent
research before you diversify you portfolio.

To put it briefly, diversify your portfolio to at least 5 to 10 well researched

Mixing between Old and New Programs

You may have favorite programs performing well for long time, programs which
you have more confidence, well researched and what you think are reliable. But
there is a concern in HYIPs arena; there is always a calculated risk even with
the most solid program. It is hard or impossible to exactly determine the age
of a particular HYIP. For this reason, it is always recommended to mix your
favorite HYIPs with new programs.

How much to Invest between each programs

It is obvious that you should spread your portfolio over different programs
proportional to the programs credibility. But, you should be careful not to
over invest in a particular program.

Let’s see what does this mean, say you have 8 programs and your portofolio
is $1,000. It is not advisable to put $450 in a single program while investing
$50 each between the rest 7 programs. You should make a balanced investment.
Balanced in a sense, spread your portfolio proportional to the credibility of
the programs.

Let’s how you can do this with your favorite 8 programs and $1,000.

To Star with, First group and grade your favorite programs based on their performance
and credibility.

Say you have grouped your programs as follows:

• Class “A” (Top performers) programs – 3 Programs

• Class “B” (Good Choice) programs – 2 Programs

• Class “C” programs (Programs with less credibility than
class “B”) – 3 Programs

And your grading for each class is:

• Class “A” is 1.5

• Class “B” is 1.25

• Class “C” is 1

(3 x 1.5) + (2 x 1.25) + (3 x 1) = 10

Now, let’s see how to distribute your portofolio over each class;

> For Class “A” programs: (1.5/10) x $1,000 = $150

> For Class “B” programs: (1.25/10) x $1,000 = $ 125

> For Class “C” Programs: (1/10) x $ 1,000= $ 100

Which means, invest $ 150 for each class “A” programs, $125 for
Class “B” and $100 for Class “C” Programs.

Note that each number given is only for demonstration purposes; actual numbers
are determined based on the number of your favorite programs and you grading.

You should also understand that the amount of investment for each program depends
on other issues, such as the minimum investment of each program. Some programs
have minimum investment of $10, $50, $100, $200; even there are programs with
minimum investment of $1,000.

I would like to point out that you should always follow-up each of your favorite
programs, make evaluations and adjust them accordingly.

In conclusion, there is no ideal diversification formula that is right for
every investor- it depends on each program, your financial situation and tolerance
of risk. But, if you diversify you portofolio over different programs, you money
will always be safe even under the worst case.

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