Tuesday, 19 November 2019

6 Worst Investments That You Can Make

Worst Investments

I'm going to share 6 investments that you may want to think twice about before dumping money into these different types of investments and this isn't to say that all six of these are not going to be poor decisions 100% of the time. Sometimes they can be a good idea, sometimes they can be a bad idea, but in a lot of cases, the drawbacks of these investments can outweigh the benefits of these different types of investments that I'm going to share with you in this article.

Just keep in mind, this does not constitute as financial advisers, this is just a piece of free information on the Internet for anyone and everyone who's willing to read.

Let's Get Started

1. Relying On Pension/ Social Security Payment For The Future.

I believe it's about 85% of pension funds are still available even when a company goes bankrupt. So if you worked for Enron in the 90s and you're getting ready to retire and you're banking on that pension fund and all of the sudden, the company goes to crap, look, you'll probably still get that pension fund, I don't know how that worked out for the employees of Enron.

Read Bad Investing Habits You Need to Break

But most people even when a company goes bankrupt will still get a pension fund about 85%, but you don't want to bank on it, you don't want to bank on anything where somebody's promising you money in the future. Just like social security from the US government, if you're 20, and you're hoping or expecting to get money from the government when you're in your 60s or 70s. Forty years from now. That's not a great idea, you don't want to factor that into your finances at the moment. 

2. Investing Into Crypto Currencies That You Don't Understand.

It's okay to invest into cryptocurrencies, but the key here is to make sure you understand what you're actually investing into and this is the problem with the cryptocurrency market is that a lot of people will jump into it with no idea what the currency actually does, no idea what it's about, who created it. Although I guess nobody really knows who created Bitcoin.

But not much knowledge on the topic and then jumping into it. If you understand it, maybe you understand blockchain and you understand how it's functioning and how you could use this certain type of currency in the future, then maybe that's okay. but if you're just jumping into it because you think you can make more money off of it, you're just gambling.

Like I said, it's okay if you know how this currency is functioning and you see the prospects for it in the future, but just make sure there's more something more than just thinking that you're going to make more money or watching your friend make money and say I want to make money on this too, no idea what it's about, throwing money into it, I don't really think that's a great idea as far as investing.

The whole point of investing is to minimize risk while maximizing potential returns, that's why we make an investment.

3. No Diversification

I've actually made this mistake in the past as well, but it's important to diversify to a certain extent, you don't want to go crazy about diversifying and put money into a hundred different types of investments. Like I said, I made this mistake in the past where I would put a lot of money in one particular stock and then everything could be going well, company earning could be going very well, and all of sudden, there's a big scandal, boom, company stock drops 30% and it slides down or maybe there are certain lawsuits that go on with the company. 

Something that you might not foresee that if you have all of your life savings in one particular stock it could be a drawback and it could end up hurting you in the long run. Make sure that you diversify a little bit and like I said, this is up to you on what you want to do, you make your own financial decisions here, but consider diversifying a little bit.

What you wouldn't do was putting all of your money in collectibles, you don't want to put all of your money in one stock or all of your money in something else that could precious metals, because you don't truly know where it's going to be and it's good to spread things out a little bit to create that safety. because if one industry goes down, maybe your real estate investments could pick up for that industry that's going down.

4. Penny Stocks

Penny stocks from the outside can look like a really interesting opportunity and honestly they can be. But I want to caution you on penny stocks a little bit because there are some drawbacks or some downsides that not many people foresee, but it's something that you want to think about.

The reason why I tend to not really like penny stocks is because there is generally less information about them than there would be with a company like Nike, Apple or coca-cola that are very much under the public eye, they have to report to the security exchange commission , so in a lot of cases, it's difficult for those companies to commit fraud or to do some other types of malicious activities.

But with penny stocks, a lot of them are traded what are called over-the-counter, what this means is that there generally is going to be less information about them. It could be more difficult to get their financial reports in some cases not even available for financial reports, but they can also be susceptible to different types of scams, which is a reason why I'm not a big fan of them.

One of them is something called pumping and dumping, you hate to see it happen, it still does happen, what happens is people will pump up the price of a stocks by buying it when it's $0.1 per share and then pump up the price by creating news about it, telling everybody to buy the stock, going to forum maybe going online somewhere, and getting other people to buy the stocks.

They pump up the price of the stock and then when it gets up to the point that they want it to be at, let's say $0.20 or $0.30, they sell, and they sell thousands of share and they essentially dump the stock. They dump it and they usually end up in jail because it's illegal, but it does happen.

You really need to be careful because there are a lot of downsides to it. You can totally go about this on your own, but if you're going to invest, maybe start with the smaller amount of money just like with any of these investments, any investment whatsoever, when you're first getting your feet wet, start with a smaller amount of money to learn the ropes of that different types of investment, that's just one piece of advice that I could have.

5. Collectibles

Investing heavily into collectibles. I said heavily because it's ok to invest a little bit of money into some different types of collectibles, but putting all of your savings say Star Wars figurines or certain types of stamps that you believe will be very high value in the future, can be a little bit tricky, and the reason for this is because it's difficult to predict if people are going to want Star Wars memorabilia in 40-years.

It might be a little bit difficult to actually predict that and because of that, it's a little bit more speculative. So I'm not a big fan of that one as well. Now, there are also certain types of collectibles that could be smarter decisions, you might be able to hold your value with some of these collectibles, but if you're buying baseball cards and you're hoping that the value of them is going to be very high in 40 years or 50 years, it's just difficult to predict it. It's okay to maybe put a little bit into it to diversify a little bit, there's nothing wrong in that.

6. Ponzi Schemes

The worst investment that you can consider is bic connect, we're not talking about bic connect, we're actually talking about Ponzi schemes, pyramid schemes, or even in some cases certain multi-level marketing schemes as well.

Whenever you see some types of investments say big connect, this was essentially a multi-billion dollar scheme that was going on within the online world about a year ago. They where offering guaranteed returns of 1% daily returns on your investment, don't quote me on those precise numbers.

But they were offering guaranteed returns if you were investing with them and anytime you see guaranteed return especially when they're high of 1% per day which is considerably high returns, you want to be very wary of that, you want to consider where's this money actually coming from. It's the biggest red flag possible when somebody's promising returns.

This happens not only with certain things like Bic connect but also with Ponzi schemes like Bernie Madoff, he was regarded as one of the best investors at the time, he was managing billions of dollars worth of assets for a lot of clients, a lot of high-level clients, but it was all just a smokescreen, he was actually scamming people and creating a Ponzi scheme where he was relying off of more money coming in to pay out investor as profits, but it was money that was coming in from new investors. So he had to continuously attract new investors and it all went to crap when the great recession hit and he had a lot of problems and now he's in jail.

But you want to avoid the Ponzi scheme, pyramid schemes and different types of activities such as those. To see how these are working to actually be able to identify them. There's a list of different things that you can look, 

  • One of the biggest ones is guaranteed returns 
  • Returns that are looking astronomical, that look out of place and wondering where's this money coming from.
  • If they're not being upfront about how they're making their money, if they're not telling you how they're making their money, be a little bit wary of it and do a little bit more research into it to make sure, that it's not a Ponzi scheme or pyramid scheme and that's just something that I think you really want to think about.

Hopefully, you enjoy reading our article

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