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Don’t Bother with These 10 Bad Investments
These investments have no place in your portfolio. Keep your cash away from these poor investments.
- Subprime Mortgages
- Penny Stocks
- Real Estate Investment Trusts
- Collectibles
- Binary Options
- High-Yield Bonds
- The Lottery
- Betting
- Savings Accounts
- Promises Too Good to be True
Subprime Mortgages
Subprime mortgages, or nonprime mortgages, are offered to lenders with impaired credit reports. These mortgages can be fixed rate, interest-only, or adjustable-rate mortgages, and no matter what type they are they can severely impact your finances.
They come at much higher interest rates compared to other mortgages and can deteriorate your personal finances. Bad mortgages were the primary reason for the 2008 financial crisis, and despite the tightening of lending regulations, they are still being given today.
Subprime mortgages are the quintessential toxic investment and should be avoided at all costs.
Penny Stocks
Penny stocks are issued by small companies that trade their stock at less than $5 per share. These are some of the cheapest investments you can make into the stock market, but they aren’t exactly worth raving about.
There’s usually a reason why these stocks are trading at such low prizes. It’s probably because the company is losing money, making penny stocks an especially volatile investment.
Instead of spending money on penny stocks, it might be a better idea to commit to a fractional share of a stock with a history of high performance.
Real Estate Investment Trusts
Real Estate Investment Trusts (REIT) pool the assets from a group of investors and use them to purchase large real estate investments. Once the rent starts coming in from the property all of the REIT investors will start seeing profits.
Sounds great, right? But real estate investing isn’t a walk in the park. You have to take into account the fees, taxes, and lack of liquidity that make rental investments particularly risky. 
Collectibles
We all remember Beanie Babies, right? In case you need a refresher, Beanie Babies are small stuffed animals that boomed in popularity in the 1990’s because it was believed that they would grow in value over time. Spoiler alert: that didn’t really happen.
This story goes far and beyond Beanie Babies, people invest in all kinds of collectibles from Pokémon Cards to sports memorabilia.
Collectibles are fun! But you shouldn’t buy them just because you have a hunch that they will increase in value. Let the knick-knacks just be knick-knacks.
Binary Options
Binary options are a type of derivative investment that offers a fixed monetary payment or nothing at all. All or nothing isn’t great odds, binary investments have no inherent value unless it exceeds the strike price.
These investments are difficult to set up and shotty yields.
High-Yield Bonds
High-yield bonds are commonly known as junk-bonds. These bonds receive low ratings from credit agencies because they have a history not paying off their debts, making these bonds a risky investment.
Here’s a key piece of investing insight: risky investment means that it has the potential for high yield.
Because low-rated companies are behind high-yield bonds, there is a higher chance that they will default or go bankrupt. If you don’t want to take on the risk of completely losing your investment, then stay away from high-yield bonds.
The Lottery
We get it, the one in a million chance of becoming an overnight millionaire is exciting! But putting your name in the drawing hat is costly, and your money could do more for you elsewhere.
The lottery is not an investment, so we can’t treat it like one. Put that cash into your investing funds and watch it grow before your eyes in the stock market or in a high-yield savings account.
Betting
This should go without saying, but betting is a toxic investment. Betting your hard-earned cash is the riskiest investment you can make with your money. Sure, you may see some returns. But building this bad habit can be devastating to your finances.
Savings Accounts
Keeping too much money in a traditional savings account can set you backwards. Savings accounts. Generate extremely low returns. So, if you want your money to grow, you shouldn’t keep it all in one big bank savings account.
Experts say that you shouldn’t keep more than one year’s expenses in a savings account. Once you’ve stocked that away, it’s best to start putting more into investing and retirement accounts.
Promises Too Good to be True
If you see an investment opportunity that’s promising returns that don’t add up- avoid it all costs. Don’t buy in to nonsense that will set you backwards.
Investments like these will lack information while making faulty promises. If an investment description has the word “guarantee” in it, it’s a sign that you should stay away.
In Conclusion
These investments are the hallmark of bad investing, but you can still make some serious financial mistakes with investments that fall outside of this list.
If you’re skeptical about an investment, it’s best that you refrain from putting any money toward it. Stick to your gut, and protect your hard-earned cash whenever you can.