8 Investments to Avoid

By Last Updated: December 14, 2023
8 Investments to Avoid

There are a lot of investment opportunities out in the market today. However, not all of them deliver the financial gains they claim to. When it comes to advising clients on which investments to avoid the first question is, where to begin? Trying to list all the questionable investments out there in one blog post is not feasible, but lets at least scratch the surface with these 8 investments to avoid:

Mutual Funds with Loads

A load is a sales charge or commission that the investor pays when purchasing or selling shares in a mutual fund. Typically, it is a percentage of the total investment amount anywhere from 1% to 5%, and is a commission to the financial advisor or broker who recommended the purchase or sale of the fund. A fee-only advisor will never place you in this type of expensive investment.

Annuities with Surrender Periods

While we aren’t fans of annuities in general, since annuities are sold not bought, don’t add insult to injury by purchasing one with a long surrender period where your money is locked up in an expensive contract.

Penny Stocks

They may seem appealing due to their low price and barrier to entry, but their high volatility makes their level of risk extremely high. They are also subject to fraud and market manipulation.

Conservation Easements

These are often presented as a tool for high income taxpayers to lower their tax burden; however, they come with risks and are subject to specific rules and limitations. Due diligence is required to ensure that the easement meets all the criteria in order to avoid future disqualification resulting in high penalties and interest.

Speculative Investments

If it sounds too good to be true, it is. Period.

Initial Coin Offerings (ICOs)

These are basically crowdfunding for cryptocurrency projects. Smoke and mirrors make these difficult to evaluate. While some might have been successful, many have been associated with fraud and scams.

Single Stocks

While once the mainstream method of investing, why limit your portfolio to a limited number of companies when ETFs and mutual funds allow you to purchase thousands of companies or bonds and diversify your risk?

Leveraged Trading

Anytime you borrow money to make an investment the goal is to amplify returns. On the other hand, this may have the reverse effect and amplify losses beyond the initial investment.

Have more questions? Contact Us

Missie Beach, CFP®, CDFA®
Senior Financial Advisor

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