Let’s talk about investments you should avoid.
Investing wisely can make all the difference in your life – once an investment starts to pay off, it can become passive income, something all of us dream of. However, it’s not as easy as you’d like it to be. If it were, after all, everyone would be doing it.
There is only one thing as important as making the right investment – and that’s not making the wrong one.
Introduction: Investments You Should Avoid
We’re all looking for that can’t-miss investment, and that’s why we should be highly dubious when the opportunity arises to make one. Think about it for a moment: if someone is selling an investment opportunity that they swear is a path to guaranteed riches, they are going against all of the rules of investment. There is no such thing as a sure thing – and yet there are still plenty of advisors out there who are more than happy to try to convince you that they can “double your money” or something similar. Some of the worst offenders are the ones listed below – we’ll look at why you should steer clear of them.
Penny stocks
Stocks that can be picked up for mere pennies sound like a good way to turn a little bit of money into a lot. If the stock goes down, you haven’t lost much, goes the reasoning. But if it goes up, then the chance for profit can be astronomical. Right?
Well, not really. If an investment worth pennies triples its value – and that’s rare enough as it is – then you still only have 3x pennies. And because of their low value, penny stocks are hugely prone to “pump and dump” schemes, which attract more and bigger buy-ins before the schemers cash in their investment and cause a dip.
Timeshares
The idea behind a holiday timeshare seems clear and reasonable enough. You buy into it for however long you want to, you enjoy a few holidays in a place that belongs to you for that duration, and you sell it on when the time is right. The problem is, timeshares are classically a hard-sell investment, the pressured sales pitch inevitably hiding a flaw in the offer. It’s best to learn how to get out of your timeshare at the earliest opportunity, because they rarely, if ever, accrue any value after the first sale. If you’re going to invest in real estate, buy something you’ll own outright, and which you can afford without extreme borrowing.
Hedge funds
Hedge funds sound like a good way to make money, often because when you see them referred to “in the wild” it is when a young millionaire or billionaire is introduced as a “hedge fund manager”. And, yes, hedge fund managers tend to do very well from their funds. They bear very little of the risk, and that’s by design. Unless you’re a very experienced trader, steer well clear of hedge funds. They’re extremely loosely regulated, so if you lose your money – and there’s a strong chance that will happen – you will have no recourse to recoup it.