By  Tue Jan 28, 2014

5 Investments You Should Never Make

3. Hedge Funds

Hedge funds are privately-owned, unregulated investment vehicles. Professional hedge fund managers pool investors’ dollars to reinvest them into various financial tools and instruments in both domestic and international markets.

The goal of hedge fund runners is to generate high returns and outperform the market — however, since managers use a wide assortment of high-risk strategies in the hopes of capitalizing on a potentially good move, the risk is great.

For instance, managers can bet on a change in direction in an attempt to cash in on a rising market. However, poor decisions and flawed bets can drain the fund.

Since the Securities and Exchange Commission does not regulate hedge funds, investors and regulators can’t oversee the activities of hedge fund managers, and are hapless to a manager’s decisions, which can bankrupt the fund.

4. Digital Currency

Digital currency is a category of currency that is gaining traction globally as a possibility to be used and legalized as tender in the future. The most popular example of this is the Bitcoin.

In November 2013, the price of one Bitcoin jumped to over $1,000, up from $15 in January! However, by Christmas Eve, the value had dropped to $700 from its ultimate high point of $1,242 in late November, demonstrating its volatility as an investment product.

Worldwide, the public, merchants, government, and financial institutions are split on the usefulness and potential of Bitcoins to be realized as a true form of payment in the future. According to CNBC, Though Germany has begun recognizing the Bitcoin as a “unit of account,” Thailand has banned the currency entirely, and Norwegian authorities released a statement announcing that the country will not be recognizing Bitcoins as legal currency.

Though Bitcoin is still a hot new fad, there is no way of predicting how well it will do in the marketplace, and whether it will flourish and grow or eventually, run out of steam.

5. Collectibles

Though the Antiques Roadshow entices the flea market junkie in those of us who hoard our old memorabilia and family heirlooms, spending a lot on collectibles can be a drain on average Americans who are not knowledgeable buyers. In general, the average non-professional collectibles investor will find the market to be extremely slow moving, and financially lackluster. As a last note, however, if there were ever an investment product to put a few dollars into, this would be probably one of the least-costly.

The takeaway from this investment roundup is to be cautious before proceeding to invest on an impulse, whim, or “what if” mentality. There are exceptions to each of these that have resulted in major profits. However, if you want a quick summary of what investments you should never make, these five hit the mark.

 

Related Stories:

Why You Should Invest Your Money

Why Target-Date Funds Are The Easiest Investment Product

How to Invest As A Beginner

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