Choices- Making an Investment

Bad Investment Choices

Everyone enjoys hearing about a skyrocketing investment. But, the more common story is an investment that ended up losing money. A good investment is one where the principal is maintained and there is a steady increase in capital. Bad investments are ones that end up losing money. These are some of the worst but common investment mistakes today.

Making an Investment in Timeshares?

First, timeshares are a bad idea. Developers and hotels try to sell interest in their properties. The presentations are excellent… promising free stays on the property and access during the year, but there is a catch. While anyone who wants to vacation at that particular place might consider this a good idea, it is a bad investment. The resale value of a timeshare is always lower than the high-pressure sales price. Can you say guaranteed loss? To make matters worse, timeshares have maintenance fees that are glossed over in the sales presentations. While hotels tell investors that they can rent out their timeshare if not in use, how do you actually find someone willing to rent, and will the rental even cover the maintenance fee, let alone provide an actual return on your investment?

Consider for a moment, if the annual maintenance fee is $450 for a one-week timeshare. That works out to over $64 per day. Assuming that you could rent a similar hotel room for $100 a day and your timeshare cost you $10,000, you paid $10,000 in order to save $250 a year. Often a timeshare that originally sold for $10,000 will resell for $1,500. At that rate, you would break even in about 34 years. But that is not counting the loss of income on the $10,000. If that is taken into consideration you will never break even let alone make a profit. Most people find that paying for their own vacation every year is the less expensive choice.

Making an Investment- Penny Stocks?

Second, penny stocks are common investment choices. These are stocks that cost less than a dollar per share. The reason why these stocks are a bad investment is because the price is easy to manipulate. Many sites and marketing agents promote penny stocks. If they convince enough people to buy that particular stock, the price will go up, making it appear to be an easy and cheap investment, at that point the promoters sell out at a profit, and once the hype has worn off the stock returns to its intrinsic value. Investors themselves make very little money, while the promotors do very well. While there are some legitimate penny stocks available, finding them is almost impossible.

Making an Investment in Higher Education?

Third, thoughtless higher education. Education can be a good investment in your future. However, many colleges today are known as degree mills. By accepting almost all of the applicants and providing a poor education, students are left with school debt and unemployment. Entering college can be a great way to a career, but it is a decision that must be made thoughtfully. Traditional degrees in abstract subjects like Philosophy, Psychology, or Ethnic Studies are not likely to enhance your earning potential. Consider your major carefully, the career choices available with that major, and the cost of the institution. Higher education is a great investment choice for many people, but it should be chosen carefully. See: The Difference a Degree Makes in Unemployment Levels

Complicated Investments

Fourth, complicated investments. Many investments turn out to lose money when the person buying the stock doesn’t understand how the company works. Many investment products come with fees and surrender charges that will dip into any profits. Also, investing in rental properties or small businesses requires constant work. Before spending any money, be sure that you understand everything including all future obligations. If something seems wrong or too confusing, walk away. Chances are, this is not going to be a profitable investment choice.

These are four of the worst investment choices today. While all investments come with some risk, being able to understand the investment and its potential loss are important before making any financial decisions. Always consider all of the options available before spending a significant amount of money.