There are many tools you can use to make an investment in yourself and your future, including buying stocks and opening your own business. But not every decision you make will be good for you, and it’s important to learn from your—and others’—mistakes. Once you make a bad investment, hopefully you won’t make the same mistake again.
These are the six worst investments I’ve ever made:
1. Relying on the past to predict the future of a stock. If you think you are getting a good deal on a share that offered high returns in the past but isn’t trading at that level currently, you probably aren’t getting the awesome value you think you are. Past performance can’t predict future performance, and you may end up sitting on a stock, hoping it jumps back to its glory days, and eventually selling it and not making any money.
2. Not shopping around for services when starting a small business. Do your research. When you’re starting a small business, you don’t need to invest in expensive design and consulting services, especially if you are paying more for them than you are actually making. Shop around and get quotes for services to ensure you aren’t shelling out big bucks for marketing materials.
3. Investing via word of mouth. Don’t put all of your money into a company that you don’t know anything about just because someone approaches you with what they say is a good idea. If you invest in a company purely based on a referral, you may end up losing money because you don’t know how the company operates and how the stock performs.
4. Dumping too much money into penny stocks. Don’t dump all of your money into a bunch of penny stocks with the anticipation of a huge return. Chances are, you will not hit the lottery but will instead sink a lot of your cash into low-end earners (if you see any returns at all).
5. Buying into multi-level marketing. The time and money required to launch a multi-level marketing (MLM) plan, where salespeople are responsible for recruiting other salespeople in addition to selling products, rarely produce considerable returns and profits. Often, you will have to spend a lot of money to purchase the supplies, products, and marketing materials you need in order to operate, but you won’t make that money back in sales. You also run the risk of alienating yourself from your family and friends because they may feel you’re always trying to sell them something.
6. Investing thousands in a business venture, hoping to make millions. Don’t sink thousands of dollars into a start-up company that someone pitches you, guaranteeing you multi-million dollar returns on your considerable investment. Don’t be afraid to say no. Think long and hard about investing, consider the actual cost of operations, and fully research the company.
You may make mistakes once in a while, but take the time to learn from your own experience and the experiences of others. Doing so can help you avoid losing lots of time and money to less-than-favorable investments.