Many of us are the kind of people who smirk at the idea of keeping money in the savings account instead of investing it. These are the people who are most likely to be investors with a high-risk tolerance and embraces a no risk no gain philosophy.
As the fields of investments are growing with every passing year,there are many arising fields which are offering such high risks that are not worth the rewards.
Unless you are a person who can afford to lose everything, here are a few investment schemes which you should avoid in order to keep yourself safe from the same.
Before getting on with the list, know the fact that it is nowhere stated that the below schemes should never be considered and if things go well you can obviously earn a lot from them too but by any means , if things go to the opposite direction, the potential losses are massive and un-tolerable to be considered.
In worst case scenarios, you can even lose your entire investment.
Without further delay lets get on with the list-
- Collectibles – Alot of people collect different items as hobby but many people hope that their hobby will someday bring them great profit from the investments, they make in it.
It is alright to spend a reasonable amount if you enjoy creating the collection but hoping to sell them for a profit some day is taking a big risk, this is because, such items are illiquid assets and they are often hard to sell.
It may happen that you are not able to find a buyer when you are in a great need to cash out. Or you may have to sell those at a steep discount. Finding out the actual value of the item can also be a hard job.
The risk of losing the entire investment always stays if by any means, the collectibles are physically destroyed.
- Shares of a Bankrupt Company – When a company files bankruptcy, its stock prices crash but eager investors flock in to buy those shares and temporarily drive up the prices. They forget the fact that the likelihood of those shares to be worth $0 is high.
If you are planning on a quick profit during the run-up then the timing should be exactly right as the spike in share prices are usually short lived.
- Gold and Silver – many of us are tempted to invest in gold and silver rather than stock market because these have held their market value throughout time and many investors seek out tangible assets.
Investing in small amounts in gold and silver is okay but anything more than 5%-10% can be risky because both of these metals are highly volatile and discovery of new sources can bring down its price.
This in turn implies that a small price change can have a bigger impact.
The riskiest way to invest in gold and silver is by buying and stocking them because it is difficult to store and sell those. A safer way to do so is by purchasing a gold or silver ETF that contains a variety of assets.
- Penny Stocks – Penny stocks often have zero history of earning a profit. Penny stocks usually trade infrequently which means you will face trouble while selling your part of the shares when you want to get out.
The issuing company for penny stocks is small and hence a single piece of news can make or break it.
Fraud is also frequent in this world. Scammers create false hype by creating fake investing websites and news letters to pump the price and trap unknowing investors dumping their shares on them.
As long as you can deal with losing your amount you invested and it is a very small amount, playing for thrill at high risk investments is okay but make sure that your d not end up losing everything.