When it comes to personal finances, there is plenty of information about what people feel are the best investment options, but rarely do you find information about the worst investments that you can make. There are very few who are going to admit to the worst investment they ever made, but knowing what investments to avoid is just as important as knowing which investments are worth pursuing. Below are some of the worst investments that you can make:
Timeshare: Timeshares are often marketed as an investment, but they are one of the worst investments that you can make. An investment is supposed to increase in value, yet timeshares typically lose 50% to 80% of their value the minute you sign on the dotted line. While the sales person will try to convince you that a timeshare will save you money, in all likelihood it will cost you much more than you ever thought. For more information on the true costs of timeshares, you can visit
Timeshare Trap. If you must buy a timeshare, always buy in the resale market.
Life Insurance: If you have talked with a life insurance agent, you've probably heard a pitch of life insurance as an investment. Insurance agents do so for a simple reason - it's a lot easier to sell an "investment" than it is to sell something that is only collected upon if you die. Life insurance should be viewed and considered for purchase for exactly what it is: life insurance. It is not an investment instrument.
There are two aspects that make life insurance a bad investment. First, it will likely keep you paying for life insurance long after the need is gone. Second, it pays much less than a competing investment would pay.
It's important to remember that insurance is protection against unlikely and unforeseen events and life insurance should be purchased as such. It is to protect against an unexpected death where income would be lost, but you should not assume that the income will be needed forever. Kids will eventually graduate from college and lead productive lives on their own. That means as your kids get older, the less life insurance you likely need.
Tips From Unknown Sources: Whether it comes from an unsolicited email (SPAM) or overhearing it in an elevator, investing tips that come from someone you don't know will almost always be a terrible investment. Since you don't know the source, you can never be sure of the claims being made. Which leads to the next investment to avoid...
Instruments You Don't Fully Understand: Investing in anything that you don't completely understand is a disaster waiting to happen. It's not that the investment vehicle itself is necessarily bad, but if you don't understand how it works, you don't know when it's time to hold and time to sell. You should always do thorough research before you invest in anything and know exactly how it works so you are prepared when decisions need to be made.
Jewelry: Sometimes jewelers will try to convince you that purchasing a bigger ring, a more expensive necklace or a higher quality stone will be a good investment. The fact is that the stones and jewelry purchased by the average person will lose value. Leave investment jewelry to the experts and purchase what you like for yourself, not as an investment.
Cars: One of the worst investments you can make is to borrow money to purchase a depreciating asset. Much like timeshares, a new car loses a good percentage of its value the second it's driven off the dealer's lot. While technically an automobile isn't really an investment at all (it's a consumable expense - you buy a car to use it up, to consume it, not to realize a yield from it in most cases), many people need one to get to work and thus it is an essential consumable.
In this case, the "bad investment" comes from paying for more than you need or extra options that will not pay for themselves when the care is resold. Unlike a house where if you buy bigger, it will often pay for itself in appreciation, the opposite will happen with a car. Purchase only what you need to get the most out of it. If you're going to purchase one, go for a 2 to 3 year old resale to get the best value not only for the less expensive cost, but the lower insurance bills.
Avoiding investments that will hurt your pocket book is just as important as finding those that will help it. No matter how much others try to convince you that any of the above is a good investment, don't listen and walk away. It may be one of the best investment decisions you ever make.
The Worst Investments You Can Make
