Investing in nothing at all has few advantages; it certainly can’t help you get ahead financially. However, one of the reasons people put off investing is the fear of losing money. This fear is logical and very sensible – you work hard for your money so you should think carefully before committing to an investment strategy which you feel to be high risk, but how do you tell? Doing something with your money is far better than doing nothing – but how do you choose the right something? Some investment strategies to avoid are listed below.
The Sure Thing
Whenever you hear you can’t lose, or it’s completely risk-free regarding an investment, listen for the alarm bells too. You hear the same sort of claims at the race track. Any investment that claims to be a sure thing is, at best, misrepresented and at worst, a scam. No investment returns consistently high yields every year. If the investment doesn’t show any poor returns at all then the sales information may be questionable.
Believe it or not, these are still offered as legitimate investments. The promised returns (in some cases over 200%) are highly suspect. Like any pastoral enterprise, there are risks associated with this type of investment. While ostriches are known to be hardy and long-lived birds they are also prone to pests and disease, just like cows or chickens, and the farms are just as vulnerable to drought and weather damage as any other. Unlike most other farming enterprises however, there is little demand for the product and this, couples with the capital-intensive nature of the investment means the promised returns are unlikely to materialise.
Investments in film sound glamorous but – contrary to popular Hollywood myth – movies rarely make money. While it has never been cheaper to shoot a film than it is now, the costs of distribution and promotion remain high – and the support of critics and/or the public remains capricious.
Like film investments above, the value of art is highly subjective. Investors who choose art as a wealth creation vehicle are taking a big risk. Should fame in any large measure elude their artist of choice, the money spent on their work will likely never be recouped. If the painter were to die, their work could well increase in value but there is no guarantee of this, or that another investor won’t sell their collection at the same time, thereby flooding the market and reducing returns for everyone concerned. The associated costs of investing in such a high-risk enterprise (storage, insurance, etc.) are also high and will impact any potential return.
Timeshares may be a great way to holiday cheaply but as an investment there is no resale value. They are also quite time intensive. To get the best out of this sort of investment, you will likely be doing a lot of trades. These investments offer no capital growth – you’re unlikely to sell for more than you bought, and it doesn’t deliver any sort of income. It may save you money, as you can holiday less expensively but that’s about all it gives you.
Learning to tell the difference between a sound investment strategy and those you ought to avoid is all about developing your own financial intelligence. For more ways to enhance your knowledge of sound investment strategies, financial planning companies like My Wealth Solutions offer informative blogs. With the right guidance you’ll jettison fear and make the smart money decisions.
What’s the riskiest investment strategy you’ve ever heard? Share your comments below.
The information provided in this article has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your GPS Wealth Limited (GPS) Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither GPS nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.
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