While every investment does come with some risk, there are some that are simply not worth your money — but knowing which ones to avoid can get tricky.
Andrew Aziz, proprietary fund manager at Peak Capital Trading and author of “How To Day Trade for a Living,” recommends staying away from penny stocks.
“These are stocks that trade at a very low price and are often associated with small, unproven companies,” he said. “They can be highly volatile and are often subject to fraud or manipulation.”
Aziz believes that crypto isn’t a wise choice for the average investor.
“While some investors have had success with cryptocurrencies such as bitcoin, these investments can also be extremely volatile and lack the stability and transparency of more traditional investments,” he said.
High-yield bonds are another asset that Aziz cautions against.
“Bonds that offer high yields are often associated with greater risk, and may be subject to default or other credit risks,” he said.
Any Business You Don’t Understand
You may be tempted to buy a company’s stock because it’s “hot,” but if you don’t understand what you’re investing in, you shouldn’t put your money into it.
“Avoid investing in any business you can’t explain to a friend,” said Chris Hill, host of the “Motley Fool Money” podcast. “The more you understand the business, the better you’ll be able to evaluate how it’s doing — and the better you’ll sleep at night.”
Any Asset That Doesn’t Have a Proven Track Record
Jully-Alma Taveras, founder of Investing Latina, recommends staying away from anything that may be too new to have demonstrated its value.
“It’s important to avoid investments that you are not familiar with or that have a very limited track record or history of proven concepts,” she said. “Although it’s important to take risks, make sure that you know enough about an industry or category before investing into it.”
Anything You Can’t Afford To Lose
Preston Seo, known as @thelegacyinvestingshow on TikTok, said to never invest more than you can afford to lose.
“Never overextend yourself,” he said. “I always say only invest what you’re comfortable losing.”
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