Compounding Allowed.

Capward Bull (reviewed here) just announced a new investment plan.  Here’s the information that we received:

Millionaire Lifestyle Package

We Just wanted to let you know that we have
added a New Investment Package to take
advantage of Excellent Forex Market conditions,
and we have explained why this is the best
package to earn more profits in a short period.

Here are Some of The Features You Get With This Package:

0.25% Per Hour For 29 Days (6% Daily)

Minimum: $2500

Get Paid 7 Days A Week

*Get Withdrawals In ( 1- 2 Hours)

Auto COMPOUNDING

Compounded Capital Back After 29 Days

Total ROI: 174% In 29 Days

A “red flag” with respect to this investment plan is that the minimum investment is a rather hefty $2,500.  We generally recommend that investors NOT make large investments in ANY online investment program unless, of course, the program can prove that it is as viable as a person’s neighborhood bank or a corporation that is selling shares on the stock market.  Sadly, few, if any, HYIPs are in this category.  But this is only our word of caution; you must be the judge…

This announcement makes sense except for the “Total ROI” (return on investment) as this obviously will depend on the percent compounding that the investor chooses.  So, it cannot be a FIXED 174%.  Furthermore, since your “Compounded Capital” is returned to you after 29 days, your TOTAL return on investment will be 274% since it must include both your investment PLUS your interest.  With zero compounding, the total interest that you will receive will be the 6% times the 29-day length of the investment plan or 174%.  So, on one hand, the announcement says that your total return is 174% while, on the other, it implies that it is 274%.

I believe that it MUST be 274% because compounding only works if a person’s compounded capital is returned to him; this is the purpose of compounding.  Using the calculator in your account, you can see how all this works for different levels of compounding.  Here’s a table of results from the calculator showing how much daily interest you are paid as well as how much you will receive as your compounded capital at the end of the 29-day investment period for the minimum investment of $2,500 — all for different rates of compounding:

  • Compounding Rate     Interest            Compounded Capital
  • 0%                               4350                2500
  • 10%                             4275                2975
  • 20%                             4161                3540
  • 30%                             3996                4212
  • 40%                             3768                5012
  • 50%                             3464                5964
  • 60%                             3063                7095
  • 70%                             2546                8442
  • 80%                             1885                10043
  • 90%                             1049                11947
  • 100%                           0                      14212

Looking at this chart, you first notice that, if you choose zero compounding, the interest your receive over the length of the plan that will total $4,350.  This is equal to 174% of your investment of $2,500.  You should also receive your “compounded capital” back at the end of the plan which, in this case, is simply your investment. 

As you look through the figures in the chart, you see that, the greater the portion of your investment that you reinvest (compound), the less will be the “Interest” that you receive on a daily basis.  In the extreme, with 100% compounding, you receive NO daily interest at all.  The last column of the chart, “Compounded Capital,” is what you will receive at the end of the investment plan.  Clearly, the more you compound, the greater this amount will be.  Again, in the extreme, with 100% compounding, you receive $14,212 which is well over five times your initial investment.  The more you compound, the greater the total amount that you will receive (interest + compounded capital). 

Needless to say, compounding can be a very lucrative way to earn money from an investment program.  However, the greater the percent of your earnings that you compound, the more risk that you take of losing your compounded capital if the program should close its doors prematurely.

In HYIP Insights #11, we published a three-part article entitled, “Is Compounding a Miracle or a Monster?” that is a fairly complete discussion of all this.  You might want to take a look at it.

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