4 bad investments to avoid at all costs

Fsp Invest, 05 Nov. 2013

Tags: investing, bad investments, how to get started investing checklist, investing checklist, where not to invest,

When it comes to finding a place to invest your hard-earned cash, there are huge varieties of things you can do with it. This includes investing in shares. But there are definitely places that you shouldn’t risk putting your money. Read on to discover four bad investments you should avoid at all costs…

You no doubt have heard the phrase, “if it seems too good to be true, it generally is,” Dr Steve Sjuggerud in Investment U explains.

It can be easy to find yourself lured with the promise of fantastic returns. But you should make sure that you avoid the following investments…

Bad investment #1: Private placements
In general, these are incredibly risky. If you’re throwing R50,000 into a telecom start-up, you should be prepared to just mentally write that money off.

If it happens to turn into millions, be thankful. But don’t buy that yacht just yet…

Bad investment #2: Thinly traded shares
These are generally bad investments. The share price may go up as you’re buying, but you’ll never get out when it’s falling.

If you do invest, you should again mentally write off that investment. If it turns into a big winner, be thankful.

Bad investment #3: Secretive investments
There have been tons of frauds here – offshore prime bank debentures, promissory notes, offshore investing club programmes – all promising things like 10% a month or more. Folks, it’s just not possible.

All their secretive stuff, saying that “this is what the big banks really do with their money” is rubbish. R10,000 compounded at 10% a month for 10 years would turn into a billion rand. Even Warren Buffett can’t touch that.

Bad investment #4: Wiring money offshore
Generally, these secretive investments require you to wire money to strange lands. But think about it, who do you go after when your money disappears?

If you know the people you are doing business with are reputable and have been doing business for a long time, you’re probably fine. But make sure you do your homework before you commit.

To keep yourself on the right investing track, make sure you follow this list…

How to get started investing ‘common sense’ checklist
  1. Is the source of this recommendation trustworthy? (Do I know this for sure?)
  2. Have I taken the necessary steps (such as trailing stop losses, etc.) to prevent a major loss in this investment?
  3. Is this share widely traded enough that I will be able to sell when I need to?
  4. Have I verified the claims made about this share’s performance? (Do NOT rely on what a broker’s research department tells you!)
  5. Am I sending my money offshore to people I do not know to be reputable?
  6. Have I done enough of my own research to know all I need to about this company?
So there you have it, four bad investments you should avoid at all costs.

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