How to do Due Diligence? Steps and Myths

Updated: 05/26/2007 19:12
Reprints/Permissions  Hyip Monitor
Undoubtedly, each investor knows that it is very advisable to do detailed research of any high yield investment program before investing money in this project. "What is Due Diligence?" you can ask me firstly. The answer is that Due Diligence (DD) is a process of an investor's investigation of the attractiveness of a HYIP opportunity and assesses the quality of the management team and the key risks associated with the opportunity. It helps to discover everything about particular program's real investment opportunity before you invest your money.

Due diligence is not just a research and finding right information about this HYIP in which you as a potential online investor want to invest your money. As I have already mentioned, DD is a complete investigating process and review of the investment opportunity which costs a lot of investor's time, patience and cold mind.

Furthermore, due diligence is probably the most critical stage in investment. Have you ever done your Due Diligence? No, you haven't? In the article I discuss all truths and myths of DD to help you investing in right and real high yield projects.

Many investors are not sure whether Due Diligence can help investors. Certainly, you have seen many HYIPs fail even after the best DD. There is never a guarantee. But if you could avoid 99% of mistakes that the Due Diligencers do, you'll have 99% better chance to make successful investment.

It is advisable for investors to start the Due diligence when the opportunity becomes interesting to you. You must understand that it is very important to investigate everything about a particular program's real investment opportunities before you invest in it. The Internet plays a central position in your investigation of the validity of a particular program.

Firstly, you should check out a program's website and its website design. It is the first step of investigating career. Not professionally designed website, Old templates with a standard collection of FAQ (Frequently Asked Questions), Unorganized and Irrelevant website navigation, offering unrealistic daily return, Poor security website, No actual names and contact details and cheap scripts do not belong to a professional HYIP web site. I hope you know about that.

But it must be noted that not only today's web site but also its look in the past must be investigated by a smart investor. Some scammers claim that they have been online for long time. You may not believe them easily and can identify using Way Back Machine if the website has been online for long time. By the way, Way Back Machine has 50 billion web pages archived since 1996.

The second step of Due Diligence is making detailed research on online HYIP forums and monitoring Sites. Forums are a great and useful place of communication among people who have the same interest with you. As a great research tool, you have to visit well-known and professional forums like Golden Talk and read what people are saying about the particular program.

Monitoring web sites are other DD tools which you can use your HYIP investigation. But there are certain issues you should be aware of monitoring sites. First, it is not advisable to depend on a single monitoring site because HYIP admins usually treat monitoring sites very well. Therefore, if you see paying status on monitoring site, it does not mean the HYIP is paying all investors.

The third step is checking the domain registration data of a HYIP company's website. WHOIS information gives you full quality information about the company including telephone number. A professional and real HYIP company must have a complete list of contact details like Domain Name, Expiration Date, Creation Date, Last Update Date, Registrant, Administrative Contact, Technical Contact, Registration Service Provider, Registrar of Record etc.

Requesting the company's documents is one of the most important investigating tools before proceeding with an investment. You need to request and verify the following documents: Valid Business Registration Certificate and Financial Records as well as List of banks with which the Company has a financial relationship.

We see that the investigating strategies mentioned above can be very helpful for investing your money online. However, investors can make serious mistakes doing Due Diligence and as a result they loss their money. Here are the most frequent mistakes and myths in doing DD.

One is to remember forever that low paying programs are just low paying ones. The low ROI alone does not prove anything and it is not an advantage. There is no doubt that low paying high yield programs can be also scam and you should do DD too. The second mistake is that if the HYIP admin is honest and nice it does not mean that even the greatest and gentlest admin is not indicator of HYIP reality and validity.

Many investors guess that there is a phone and an office of HYIP Company, the program must be legit. Nowadays, you can get real but anonymous phone number for few hundreds of dollars and in many countries an office can be hired anonymously. It could be a call center, virtual office or other similar kind of service.

You can't track the owner of that number or that office, therefore it may not help you to track potential scammer. Very often the HYIP scammers give phone numbers and office addresses with the only idea to gain trust and make themselves look real.

Even though the HYIP is paying for a long time, it is a good sign unless you are dealing with a Ponzi scheme. The longer a Ponzi scheme pays, the lower is the chance for you to win when joining. Undoubtedly, paying for long time alone does not prove anything.

Another great myth of DD is that offering managed accounts means they do really trade. Offering managed account really proves that the company offers legitimate investment service. A very clear indication for the financial scheme is when the managed accounts are producing losses, but the HYIP keeps paying just fine.

In conclusion, I'd like to say there is always a high risk associated with High Yield Investment Programs. But you can do something to minimize these risks by implementing proven and effective strategies. Don't forget that mistakes by doing DD can be fatal for your investments. Discover Sherlock Holmes in yourself!


About the author

Nicole Berger has over seven years experience writing and editing for online and print media. She has held various editor and associate editor positions in some of forefront independent media publications. A consistently dependable team player, I thrive in a high-pressure environment, enjoy the challenges of meeting deadlines and managing a team, and am comfortable researching, writing and editing on a wide range of topics.
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