David F. is a 50-something investor from the Tulsa, Okla. area who is nervous about the markets but unhappy about his ability to generate yield in anything he thinks is "safe." In short, he's like a lot of investors nowadays.

Recently, in searching for yield, David came across websites for high-yield investment programs that promise sky-high returns.

"I know that if it sounds too good to be true it probably is, and that this is way too good to be true for long," he said in an email. "But if any one of these programs actually pays what it says it does for just a few days, I could come out ahead even if I had a different program that is a total loss.

"The minimum investments are 10 bucks, and I'm wondering if this is worth a try."

Dreams and schemes

This is how smart investors do dumb things, asking the right questions but not trusting what their eyes are showing them. It's why high-yield investment programs are the Stupid Investment of the Week.

Stupid Investment of the Week highlights the conditions and characteristics that make an investment less than ideal for the average investor and is written in the hope that showcasing one dangerous situation will make it easier for investors to avoid trouble elsewhere.

To call these high-yield investment programs (HYIPs) Ponzi schemes is something of an insult to Charles Ponzi, because these things don't last long enough to gain the traction that makes an investment fraud run for a long time.

Signs of imminent self-destruction are everywhere when you look at a HYIP website; even the investors who take their chances acknowledge that the landscape is overrun with frauds and hardly the place for someone looking for an alternative to paltry CD yields.

But the fact that there are reported payouts -- even if it's just for a few days -- is what intrigues guys like David. As he pointed out, his online savings account is getting about 1% interest.

His proposition, therefore, is to pocket astronomical daily returns from a HYIP, which include outfits such as SolidBank, OneInvestment and Genius Venture.

SolidBank promises a 130% return after one day, 220% after three days and 600% after a week, although if you read the fine print you will find that those numbers include the return of your principal. See the SolidBank website.

OneInvestment, by comparison, has myriad plans offering returns of anywhere from 0.6% to 20% per day, depending on the amount invested and the length of the lock-up period.See the OneInvestment site.

Signs of trouble

David's idea was to invest as much as $25 into four different programs, noting that "if one of them more than doubles my money in three days and another one loses everything, I'm better off so long as I still come out more than 1% ahead."

This is also how a lot of investors get sucked into penny stocks, except that HYIPs make penny stocks look good.

Honestly, David would be better off playing the roulette wheel.

As with penny stocks, HYIP buyers recognize that being in a program first is critical, because trouble can start within a couple of days. If there aren't enough depositors immediately, these funds miss their first daily payments to the suckers (I mean "investors.").

I emailed the contacts at five different HYIP sites currently reported as paying -- some of them quit excited to have made their payments for a whole week now! -- to get more insight into the business, but none returned my messages. As a general rule, these are offshore companies that aren't exactly interested in media attention.

You don't need to dig deep to find hallmarks of trouble, including:

1. Investment ideas that no one explains

OneInvestment was "established by a team of specialists with huge working experience in the offline and online investment market, FOREX, stock trading activities, sports-betting market 'arbitrage' and investments in various funds."

Even if that's true, it doesn't say how the team earns returns that the top hedge fund managers don't approach.

If you reach the crossroads of sky-high investment returns and poor explanation of how it's done, you've come to a very scary place.

2. Electronic currencies

HYIPs live on e-currencies. Various electronic currencies like PerfectMoney or Liberty Reserve -- are used in many legitimate trades in many places on the Internet; that ensures that regulators won't consider it to be an automatic danger sign.

That said, the average investor should be working in real money, because there is safety in having a recognizable currency; your corner grocery store is not going to be thrilled if you try to pay in e-dollars.

3. Statistics to create an air of legitimacy

HYIPs like to say how long they have been running, how much they have paid and more. SolidBank currently shows that it started on June 5, has more than 4,300 accounts (more than 3,000 still active, meaning 25% of accounts gave up in the first week of business), with nearly $250,000 in total deposited (of which almost $160,000 has been withdrawn).

None of the statements made by the HYIPs about their status, payouts or assets are audited; they could be complete works of fiction designed to suck consumers in.

4. No focus on risk, and either disclaimers that avoid the subject or are missing altogether

Standard investments not only cover the risks, they tend to go overboard on everything that could go wrong. HYIPs, by comparison, often have warnings that management is exempt from various securities laws, or they carry virtually no warning whatsoever. They may also require you to sign membership agreements where you affirm that you are not, for example, involved in law enforcement. Legitimate investments don't go out of their way to exclude law officers.

5. Confusing explanations over how you participate, what you get and when you get it

Banks don't tell you that the return is 101%, they give you the return on your investment. High-yield programs are built to confuse you and to get you to take the chance; the hope for these operators is that a guy like David will jump in, and if he gets paid on a one-day investment that he will eventually try for the really big money on a 14-day investment, a month-long investment or something that should last a year. That's where the risk is no longer a few bucks, but something serious.

Investors have a lot of ways to step up risk to increase yields. High-yield investment programs are not one of them, because they're not even on the risk scale, they're way off the deep end.