Everyone has dreams about undertaking risky investments that pay off and leave them with enormous wealth. However, there are a few investment strategies that almost never pay off.
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Here is a look at five risky investments you should avoid at all costs.
Alternative investments
Alternate investments, such as long/short equity funds, managed fixtures funds, market neutral funds and bear market funds are always a bad investment strategy.
These funds claim to be immune to any negative trends in the stock market, which is attractive to investors during recession times. However, the average return of these funds was measured at – 2% by the investment research group Morningstar.
Time share
Time share offers seem so appealing when they are first presented. Owners of luxury resorts or spas will talk about how you can own a vacation home for a lifetime by spending $30,000 or $40,000.
The terms of the offer mean you will get the vacation home for a few weeks a year, for the rest of your life. However, most of these properties are not worth that type of investment. Their upkeep costs are huge, and they deteriorate immensely over time. It is a lot better to invest in hotel rooms each time you are vacationing.
Equity-indexed annuity
These products are pitched as having no risk, with the offering firm claiming that there will be no risks attached to your name if the invested stocks tank. However, a simple dose of common sense would indicate that this is not possible.
How can a company take your money, invest it in a set of stocks, find out that those stocks dramatically lost price, and then absorb all of the risk? They would go bankrupt in a year. Most of these offers have tons of fine print, which put all of the risk at your doorstep.
Oil drilling partnerships
If you ever get a call from someone who wants you to invest in an oil drilling partnership, hang up the phone immediately. Even if it is a friend or a colleague asking, it is best to avoid these situations.
The offers often suggest that you put in $50,000 right now, with the promise of $10,000 or $20,000 a year for the rest of your life. These offers are almost always scams. Any successful oil drilling company would have a ton of startup investors, and they would have no need for making cold calls to strangers.
Paying off debt before saving
This is a terrible short-term or long-term investment tip. There is no reason why anyone should put all of their spare income towards reducing debt. It is best to have a 50/50 approach, with 50% of unused income paying off debt and the other 50% used for stock investments or bank savings.
With the world in options for potential investments, you can be sure that there are different types and quality of opportunities. The last thing that you would want is for an investment to go south and file for bankruptcy.
Marlena Stoddard
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