Home > Investment Guide > Investing Basics

5 Investments You Will Never Make Money On

Investing can be a fickle thing. On one hand, it seems that investing your money is always a smart use of it. On the other hand, there is always risk involved. Some investments have a much greater risk than others, but they are also tend to have a much greater reward. When investing, it really comes down to the individual. How comfortable are you with the risk you are taking?

A lot of investments will net you at least some form of return. The key is netting a return that is greater than the increase of inflation. Options such as a 401k, IRA, Roth IRA, stocks, bonds, and more offer one way to invest your money. You can also invest into property or land. Property investors can choose from residential or commercial property to invest in. Land investors often choose between vacant land, farming land, hunting land, or more.

Despite popular belief, investments do not always make you money. In fact there are some that you might never make money on or make very little money. To preface this list, let’s start by saying “never say never”. In the theoretical world of finance, almost anything is possible but the probability still says unlikely. With that caveat, let’s look at some of the investments that you are bound to lose money on.

Timeshares

Timeshares seem like such a magical thing. You can potentially partially own a vacation home in whatever tropical destination you would like for a portion of the year. Unfortunately, you have almost every investment factor working against you. For starters, the resale of a timeshare is almost always lower than the original investment. So if you are purchasing directly from the developer of the timeshare, you can almost be certain that if you choose to sell your timeshare, you won’t make back your money. If you are dying to buy one, buy a resale timeshare which can sometimes be half of what the original was.

Timeshares also have maintenance fees that could be thousands per year. This needs to be factored into the overall investment cost. If the fees are high, you might be better off just paying for the vacation each year. Speaking of vacationing each year, the timeshare is only useful if you do plan to use it each year.

Penny Stocks

It’s only pennies right? Wrong. For those unfamiliar with penny stocks, they are stocks priced under $1 per share. The trading volumes are so low on these stocks that the prices are easy to manipulate. The people who make money in penny stocks are the ones promoting them. Sure, you could get lucky and invest in a penny stock that has a large appreciation but with that logic winning the lottery isn’t too far-fetched either.

Higher Education

Before the pitchforks come out, understand that not all higher education is a bad investment. In fact, the majority is a good investment. However, just like the stock market, there are bad and good choices.

Higher education is an investment in your future. You take out a whopping student loan with the mindset that your future career will pay this back and then some. Unfortunately, there have been a handful of poor higher education establishments that don’t provide any significant advantage. These educational institutions accept everyone and leave graduates with no upper hand when entering the real world. These “degree mills” have been under scrutiny as of late because of multiple lawsuits.

Additionally, there are poor majors to choose from. Not going into detail, it is important to determine what career options are available for individuals who graduate with a certain degree. More students should view higher education as a financial decision rather than a “it’s what I’m supposed to do” decision.

A Car

For young adults, purchasing their first car may seem like the first “grown up” purchase they get to make in life. While it is an exciting time, it also happens to be one of the worst investments you can make. The second that the car is in your hands and leaves the lot, it drastically depreciates in value. So you are now making consistent payments on an asset that is losing value every day.

In addition, owning a car also means additional fees such as car insurance, state registration, gas, and maintenance. You are literally pouring money into an asset that will provide you with no return upon sale.

Buying a car is often a necessity though, so it should be seen as a necessity, not a luxury item. Purchase a car within your means and forgo the charm of a luxury vehicle. Remember the purpose of your car is to get your from Point A to Point B. It is a good idea to check with Kelley Blue Book to see what the resale value of cars are. It is smart to find a car that holds its value and remains in-demand for years to come. It’ll be much easier to sell it for a higher margin down the road.

Any Investment You Don’t Understand

One of the absolute worst investments you can make, is one that you don’t understand. This applies to any investment product that seems complex or investing in a stock that you aren’t familiar with. Doing your due diligence is half the battle when it comes to making money on an investment. If the investment product requires fees or work and the terms aren’t clear, avoid it. If you can’t figure out how a business makes their money, don’t invest in their shares. That is how investment legends such as Warren Buffett and Peter Lynch have made their living; avoid the unknown.

comments powered by Disqus