Wednesday, September 27, 2006

Top 10 "Due Diligence" Myths

by Tony Clifton

Are you doing your Due Diligence? Everyone in the high yield investing words speaks about this. You have heard it many times - "Do your DD and you'll be OK".

Is this really true? You have seen many high yield programs fail even after the best DD. There is never guarantee. But think about it, if you could avoid 99% of the mistakes that the Due Diligencers do, you'll have 99% better chance to make successful investment.

Here are the top 10 mistakes and myths in doing DD:

1. Low paying programs are more reliable Low paying programs are just low paying. The low ROI alone does not prove anything and it is not advantage. The lower the program pays, the longer you need to be in profit, the bigger is the risk to loose. Of course you should spot the crazy paying programs as scams, but after that the ROI is not a criteria regarding program's reliability.

2. The admin is honest (nice) The admin's behaviour has too little to do with the investment program credibility. Surely, with good psychoanalysis you could understand if the admin is mad or dishonest, but even the greatest and gentlest admin is not indicator that the program is for real

3. There is a phone, the program must be legit Today you can get real but anonymous phone number for few hundreds of dollars. It could be call center, virtual office or other similar kind of service. You can't track the owner of that number, therefore it is not heping you to track potential scammer. Very often the false investment programs give phone numbers with the only idea to gain trustand make themself look real.

4. There is an office, the program must be legit Getting an office is harder and costs more. But still it won't help you trackign the thief. In many countries an office can be hired anonymously, and even if this option is not available, the thiefs use fake IDs (you can even purchase one online).

5. You can meet the admin, they are for real Yes, if you can meet the admin, you at least know he/she is a real person. Can't they disappear though? See the previous item about the IDs.

6. The admin can show incoroporation documents, this proves they are for real Option 1: The incorporation documents can be faked. Ok, you can eventually check this and spot them out Option 2: The company can be real, but registered by phantoms. If you can't track the person who owned the scam, you can't do anything useful Option 3: Ok, there can be a real company. And even then they can scam you - the HYIP history shows several cases in which the program simply start reporting losses. You can't call the authorities against such company - because when invested you have agreed that losses can occur.

7. The HYIP is paying for long time This is certainly nice unless you are dealing with a ponzi scheme. The longer a ponzi pays, the lower is the chance for you to win when joining. Ponzis have lifetime, you know. Paying for long time alone does not prove anything.

8. Offering managed accounts means they do really trade Offering managed account really proves that the company offers legitime investment service. But this does not prove that their pooled (or whatever they call it) HYIP is also based on real trading. A very clear indication for fraudient scheme is when the managed accounts are producing losses, but the HYIP keeps paying just fine

9. They accept bank wires, so they can't run away They can run away if they want. I can name at leats 5 HYIPs which accepted wires, but this did not stop them to diappear. Using bank makes the things harder for the scammers, but not impossible

10. They have referal program, must be scam The affiliate marketing is one of the most powerful tools in the internet business. There is nothing wrong to offer referal bonuses for investors who bring other investors - this is a very effective advertisement method. The referal bonuses are red flag only when they are too high.

Are you doing your due diligence when investing? Are you following the myths?

Tonly Clifton is an Editor in Chief for High Yield Weekly Digest (

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