Opinions expressed by Minority Mindset contributors are their own.
Got your tax return and want to invest that money? WOOHOO!
I’m happy to hear you’re not buying a new phone or the latest pair of Air whatever shoes. There are a bazillion things to put your money into. Before you sprint into the market and start buying everything, let’s first talk about some horrible investments.
Here are 3 of the WORST investments you can get into (not in any particular order).
1) Penny Stocks
A penny stock is any stock that is priced below $5.00. Naturally, these appear attractive because if you were to buy-in early and the stock became the next Amazon, Facebook, or Google you’d be set for life! This rarely happens and we all just get carried away with the potential.
New to the investing game? You’ll definitely be bombarded with advertisements from self-proclaimed “gurus” about trading penny stocks. Ignore their flashy lambos, Rolexes, and trillion dollar pants. Don’t believe them when they say it’s easy. Don’t buy their course. Don’t pay for their signal system. They’re actually just expert marketers.
The biggest issue with penny stocks is that they’re not subject to strict regulation. Moreover, they have limited history, and are not traded often. So, you may have thousands in “Jack’s Tech Wizardry” but no one else in the country wants it because it’s such a small company. When you need to sell you’ll be stuck holding the bag like a chump.
Oh, and did I mention these are often pumped and dumped? Promoters will buy a huge chunk of the outstanding stock, post a lot about the specific stock on forums and social media, and then they dump it out when the general public gets in.
I’m a chump holding onto a bag of penny stocks that I thought would balloon into my retirement. I could have done better research. Learn from my mistakes!
A timeshare is fractional ownership in a property. Typically these are vacation properties.
Despite what the peppy salesperson tells you a timeshare is NOT an investment. It’s a vacation you pay for every year to the same location. Also, you don’t just pay for the timeshare every year, you also pay maintenance fees, and for any repairs that may need to happen. How long do you pay for? The short time period of forever.
Investments rise in value, timeshares don’t. Looking to put some money towards property? Instead of throwing it at a timeshare, think about buying some real-estate you can rent out or put on Airbnb. Maybe even think about getting into a real estate investment trust.
Come on, cash? Really? You want to keep your money in cash under your mattress?
WOW. One word: inflation. Your cash loses its buying power every year. It’s typically by 2-3%.
I know 2-3% sounds minuscule, laughable even but it compounds! Maybe in 2000 you wanted to buy some fancy car to treat yourself. Back then it cost $10,000, however with all the time that passed it’s going to cost you $14,883.47 now. Yup, that same $1 from 2000 had the same buying power as $1.49 in 2018.
Instead of being bullied by the inflation and holding your money in cash like some sort of bank robber, put it into something better. Look for alternatives that rise in value that outpaces the inflation rate or create a decent cash flow.
Don’t let your hard earned money deteriorate into worthless pieces of paper!
They say a sucker is born every minute. Educate yourself on the good and bad investments out there so you’re not one of them. Be sure to research every investment you make, both the good and bad. Don’t put your money into things you don’t understand. Most importantly, don’t be too scared to invest! Being out of the market won’t make you any money.