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Article
Compounding 
Published 2006/6/29
Article Rated: 6.98
1.8 star rating (97 votes)
Compounding refers to generating earnings from previous earnings. The ability of current investment value to generate earnings, which are then reinvested in order to generate their own earnings.

Suppose you invested $1,000 into a particular HYIP that pays 30% monthly interest. The first month, the shares rises 30%. Your investment is now worth $1,300. . In the second month, the shares appreciate another 30%. Therefore, your $1,300 grows to $1,690. In the third month, the shares rises 30%, your principal will be $2, 197. IF you watch the rate of growth for every month, the growth rate increases with time. i.e. In the first month growth is $300, in the second month $390, and in the third month $507, and so on. If you extrapolate the process out, the numbers can start to get very big as your previous earnings start to provide returns. In fact, $1,000 invested at 30% monthly for 1 year would grow to nearly $23,300.00 (and that's without adding any money to the investment)!

As you have seen earlier, for a business involved in a real investment opportunity, compounding produces extremely good result. But you should be careful on how to use compounding in HYIPs.

One of the greatest problems in HYIPs arena is that it is impossible to predict the life span of a particular HYIP. Thus, it is important to take a mechanism to make your investment safe. One way of doing this is to properly use different compounding options

Let‘s see what does this mean:

Say you invested $1,000 into a particular HYIP that pays 30% monthly interest. As we have seen it earlier, with 100% compounding, there is a possibility that $1,000 invested at 30% monthly for 1 year would grow to nearly $23,300.00. But what would happen if the HYIP goes out of business in 6 months? You lose all your hard earned money badly. For that reason, it is important to implement a technique on how to implement compounding in HYIPs.
It is always recommended to get your original spend back as fast as possible, i.e. set the compounding option to 0% until you return back your initial investment, then after, you can compound your shares while withdrawing 50% of your profit by setting the compounding option to 50% . Why 50%? Actually this is not a strict rule; it is my recommendations based on my experiences in HYIPs. But you have to be careful with this. Always watch out every HYIP you invested for the red flag. If you see any red flag for a particular HYIP, keep on withdrawing by setting the compounding option to 0%.



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