DNI Explained — Again.
I am sure that many readers of Emily News are becoming familiar with the term “Daily Net Interest” (DNI) that we first introduced in Part 1 of HYIP Insights #12 entitled “An Investment Formula” (and that you can read here.) We feel that this term is extremely important to the HYIP investor as it enables him to compare the profitability of investment plans that can look very different at first glance. Some plans will return your principal at the end of the investment term while others will not. The terms of investment plans can vary widely. Interest can be offered on an hourly, daily, weekly, or some other basis. There are probably other variables too. DNI sorts through all this and is the SINGLE TERM that you need to understand in order to see how lucrative an investment plan might be.
But, let’s review still one more time exactly what we mean by DNI. Even though investment plans might pay you earnings at different time intervals and for different lengths of time, all that really matters is the AVERAGE profit that you can put in your pocket on a daily basis. You may not actually receive this profit every day. However, after an investment plan is complete, this is the equivalent of the total percent profit if you averaged it out on a daily basis over the length of the plan; this is the DNI of the investment plan. If, for the same investment, one plan earns you an average of $5 per day profit while another earns you $6, the six dollar plan is the better deal because the daily profit or daily net interest (DNI) is greater. That’s easy to understand. The trick is to see through all the information that camouflages the DNI for the investment plans you are interested in.
I ought to note that I have never seen the term “DNI” used before. So, Emily News might be making a little bit of HYIP history here. I actually think that it is the type of thing that Admins would probably prefer NOT to get involved with as it places all investment plans on an equal footing. By that I mean it cuts through all the trickery and clearly tells a person just how profitable an investment plan might be. Of course, it also lets you know if a program is offering such a high interest rate that it is likely to be unsustainable. We discussed the significance of DNI with respect to plan longevity in Part 3 of HYIP Insights #12 (that you can read here). But, that’s another issue that we won’t get into here…
In Part 1 of HYIP Insights #12, I worked through a number of different examples of how to calculate DNI. With just a few changes I’m going to reprint that part of the article here. That’s how important I think all this is…
DNI Calculations — Again.
Example 1. Investment plan pays 1.5% interest per day for 60 days and returns your principal at the end of the plan. This example is easy. Since you are getting your principal back, all the interest you earn is pure profit. So, the daily net interest, or DNI, for this example is simply 1.50%.
Example 2. Investment plan pays 3.5% interest per day for 45 days but your principal is returned to you as a part of your interest earnings. Here your TOTAL GROSS interest earnings would be 157.5% (3.5 x 45). Since your principal is included in this, you have to subtract 100% (corresponding to your initial investment) to get the TOTAL NET interest you will earn or 57.5%. This is earned over a period of 45 days. So, finally, you divide 57.5% by the 45 day investment term to get the equivalent DAILY NET interest, or DNI, of 1.28%. A few people might have been confused by these two cases. Example 2 pays a higher interest rate, but, since it includes your principal, Example 1 is actually a significantly better deal.
Example 3. Investment plan pays 25% per month and returns your principal after 60 days (2 months). Since your principal is being returned at the end of the investment term (like Example 1), your interest earnings are pure profit. Assuming there are 30 days in a month, your average daily net interest, or DNI, is 0.83% (25/30). So, even though this example has the highest numerical value for its advertised interest, its daily net interest is the lowest.
Example 4. Investment plan pays 1.3% forever. This is an example of a “perpetual” investment plan. It’s a little bit difficult to compare to the other examples as the principal doesn’t explicitly come into the picture. Such a plan might typically offer an interest rate on the low side, the explanation being given that it’s a good deal as you will be earning interest on your deposit forever. It IS a good deal if the program is a survivor. If it isn’t, it’s a bad deal. But, this is the classic HYIP dilemma again and we needn’t get into that. I think that I would treat this example the same way we did example 2. But, in this case, you would have to ASSUME a life for the program. This is equivalent to assuming an investment term. Just to put some numbers on this, let’s assume the program will survive for 6 months (180 days). So, the total gross interest you would receive would be 234% (180 x 1.3). Subtracting 100% to correspond to the return of your principal, the total net interest you would receive for the 180 day period would be 134%. Dividing this by 180, you would get the average daily net interest, or DNI, earned — 0.74% (134/180). Suppose we assume that the program would survive for a year (360 days). Then, the total gross interest that you would receive would be 468% (1.3 x 360). Again, subtracting 100%, the total net interest would be 368% and the average daily net interest, or DNI, would be 1.02% (368/360). So, as you would expect, the longer the program survives, the higher the interest that you would earn.
Well, it’s easy to see that this can get a little bit tricky. However, I hope I have made the point clear that, in order to compare interest rates offered by different programs, you MUST change them all to daily net interest (or some other common interest rate). You have to compare apples to apples or oranges to oranges. You can’t compare apples to oranges and expect to come to useful conclusions.
In Part 2 of HYIP Insights #12 (that you can read here), I went through the calculation of DNI for a number of HYIPs that were in operation when I wrote the article. You might want to take a look at it in case you would like to see more examples of how to calculate DNI.
OK, that’s enough on DNI! I hope that by now you are becoming comfortable with the term…
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