Rabbit’s High Yield Adventure

I have been caught in the compounding trap many times in the past two years. The most recent  incident occured last month with Compactsurf. While I am in profit now overall, my gains over the past two years would have been significantly higher if I had been more prudent with my compounding. It is very easy to fall into the compounding trap. We put our money into a program with the hope that in a few months or years it will make us better off. Some of us put our money into a program with a specific goal in mind (buying a car, taking a vecation, saving for your kids college fund and so on). What better way to reach our goals than to compound in our favourite program? In the case of Compactsurf, I was determined to max out my account as fast as possible. In my zeal to accomplish this goal, I ended up with a $1000 loss. Had I been less aggressive with my compounding, I would have been a few thousand in the green instead of a thousand in the hole. Why haven't I learned my lesson after 2 years? The answer to this is simple; one is always thinking that the current program is different and shouldn't be judged in the same light as the ones that got you before. Will this happen to me again? Very unlikely. I have finally learnt my lesson and will be making principal retrieval a priority going forward.

Getting Your Principal Back

When we join a program, instead of thinking about when we will be millionaires, we should be thinking about when we will get our principal back. This should be our very first goal. Of course the speed at which we try to get our money back will be dependent on the risk associated with the individual program.

Very High Risk Programs 

We should try to get our principal out of very high risks programs as fast as possible. All Programs that pay more than 1% per day falls into this category. These programs are generally just gambles. Programs that are very high risk tend to fall into one of two Scenarios:

Scenario #1. The program locks your principal for a certain amount of time and pays out profit daily, weekly or monthly. One generally have the option to compound or not to compound.

Scenario #2. The program pays out your principal plus profit after a set amount of time (usually 30 days or less). In this case, you would only be able to compound by "reinvesting" everything you have been paid out (principal + profit). Most of today's Paid to Surf programs fit into this category.

For scenario one, the only way to get your principal back as fast as possible is to avoid compounding. For scenario 2 there are a few options:

1. Keep the profits once you get paid and only "reinvest" the principal amount (Moderate)

2. Keep a percentage of the total payout (principal + profits) and "reinvest" the rest (Varies depending on the percentage being kept) 

3. Keep the principal and only "reinvest" the profits (Very Conservative) 

For smaller amounts (under $1,000) I would recommend option one. For larger amounts, options 2 and 3 may be worth a look. If you have an itch to compound, one can keep a percentage of the profits earned and reinvest the rest (the amount kept back should not be less than 50%).

Lower Risk Programs

There is no such thing as a risk free program in the high yield arena. All programs have inheritent risks associated with them — even the ones backed by real businesses and trading. As such, we need to have a strategy to get our principal back into our pockets with these programs as well.

One thing you will notice with most real (as in non-ponzi) programs is that they do not have expiry dates. The funds you put in the program generally keeps making you money as long as the program is around and the businesses/trading that back it are doing well. Another thing you will notice is that real programs do not pay out profits on a daily basis. Most pay / report profit on a monthly basis. A few pay or report based on a weekly or bi-weekly time frame. So what are some of the strategies that we can use to get our principal back? There are a few ways that one can go about this:

1. One can withdraw all profits at the end of each reporting cycle until the total profits withdrawn is equal to the principal amount (Conservative option).

2. One can withdraw a percentage of the profits at the end of each reporting cycle and leave the rest to compound (Moderate).

3. One can compound for a set amount of time (or dollar figure) and then withdraw the principal (Aggressive). A play on this strategy is to double your money and then withdraw your principal amount. 

For smaller amounts, number 3 may be the way to go. For large sums, strategies 1 and 2 may be worth a look.  

What To Do After Getting Principal Back 

What you do after getting your principal back is up to you. For high risk programs, I would suggest taking a percentage of the profits every time that you are paid out. If the program has a built in compounding option, compound 50% or less of the profits and put the rest in your pocket. For lower risk programs I would suggest setting benchmarks. These benchmarks can be either time-based (example every 3 months you take out  x amount) or based on dollar value (example every $5,000 increase in value you take out x amount).

Conclusion

Our primary objective in this arena is to make money. A lot of us are losing money (or not making as much as we could) because we are caught in the compounding trap. Even with the strategies above, there are no guarantees that we will be able to retrieve our full principal amount in every program that we join. Still, I think we would all agree that it is better to get at least some of our money back than lose it all due to compounding.

keyword: compactsurf 

• You can read 2 Years in HYIPS Part 1 - My First Program here.