The struggling economy has everyone second guessing their financial  portfolio’s and looking for ways to have a more secure investment plan.  Regardless of the economy there are some investments to avoid at all  costs.

Hedge Funds

Hedge funds are exclusive clubs that promise higher than average  returns. Before the financial bubble burst these companies, usually  privately-owned would pool members funds together and reinvest them into  various markets. The trouble with hedge funds is, they are not  regulated by the SEC. Anyone with any sort of business savvy and enough  capital can open a hedge fund. Despite the high risk, they are  attractive because of the lucrative returns for the managers and the  members. However, if the company leverages poorly, the investors carry  all the risk and are left with zero, not even their original investment.

Penny Stocks

Penny stocks are another high risk investment. They are called penny  stocks because they are sold on what is known as pink sheets and are  usually under $1. These companies have not yet proven their financial  solvency and there is very little due diligence completed on the  company. This is why they are unable to trade on the regular stock  market. These stocks are volitale and it is easy to come out on the  losing end in more debt than when the first trade was made.

Payday Loans

Payday loans fill a unique void in the banking products market. Banks and credit unions are choosy about who they loan money to, including their own members. This left many people with less than stellar credit  unable to get cash during difficult times. The payday loan industry offers unsecured cash loans with few restrictions and the money is usually available within hours of approval. The loans are typically repaid the following payday, hence their name. The trouble with these types of loans are  their high interest rates and processing fees. This  leaves the very people they serve vulnerable to needing another loan to carry them over until the next payday. It can become a vicious cycle of loans and fees for the borrower.

HYIP’s

In the cyber-world there are a myriad of ways to lose money. HYIP’s  or High Yield Investment Plans/Programs are much like penny stocks  except there usually is not a company to invest in. Unfortunately,  HYIP’s are usually thinly veiled Ponzi schemes. The lure, like all high  risk investments, comes with a high return. There is little to no  information on management or details on how the funds will be invested  to guarantee such a high return. Money from new members pays the old  members, until the plan can no longer support itself. Only those who  enter early and leave early keep their money.

Gambling

Lottery tickets, dice games, poker, casinos, these are the trappings  of problem gambling. There is absolute debt with gambling. What starts  as fun can leave the gambler in debt and in some cases homeless.  The  game of chance combined with skill is the lure for gamblers. The next  round or game is always sure to be the winning one in the gambler’s  mind. Unfortunately, because it is a game of chance, the odds are  favorable towards winning.

There are many investment options available to choose from depending  on means and risk aversion tolerance. Choose long term investments to  avoid debt and heartache.