Trust management has recently emerged in binary options trading. Previously, this practice was only prevalent within the framework of the financial markets. What does trust management entail? It is a form of investment where the investor entrusts their capital to a trader and receives a percentage in return.
Often, trust management is masked by high-yield investment programs (HYIPs). The term HYIP, which stands for "High Yield Investment Program," refers to a highly profitable investment scheme. This type of investment was invented in America by Charles Ponzi over a hundred years ago. He collected money from clients and provided a receipt, promising to return their funds after three months, along with a fifty percent profit.
One could argue that HYIPs are a form of financial pyramid schemes. These investments do not involve any actual trading of options. Investors earn profits based on the funds contributed by new members of the pyramid, perpetuating the cycle. Earnings continue as long as there is a flow of new clients into the HYIP. However, once this influx of funding ceases, the pyramid collapses, and the organizers vanish without a trace. While some investors may indeed make a significant profit, financial pyramid schemes inherently involve substantial risk. The likelihood of being among the winners is quite low.
Differentiating between HYIPs and legitimate trust management can be identified by the following characteristics:
1. Promises of excessively high returns. Sometimes the investment yields offered are astronomical, reaching up to 150 percent per day.
2. There are no confirmations regarding the company's actual activities. The official websites of such "traders" typically only feature advertisements and promises of enormous returns. Information about potential risks is absent, and clients are not warned of the possible losses that can occur during options trading.
3. Another significant factor is the absence of a contract with the trust management company. Investors simply hand over their funds to a firm that promises lavish earnings, leaving little recourse. In such cases, it is virtually impossible to recover invested capital. A contract serves as a safeguard for your investment's security.
