Show Notes for this Episode:
Challenging financial times, or say, a major public health crisis like a coronavirus, bring out the “shiny object investments”. These investments are designed to grab your attention and lure you into making risky bets with your money. The people and companies behind these investments prey on your fears and vulnerabilities.
There is no such thing as “get rich quick”. If it sounds too good to be true it probably is. Investments that sound exciting and like a no-fail opportunity are designed to make you ignore the risks, which are usually significant!
Hot stocks and no commission trading can also lead to danger. Remember when the dot com bubble burst?
This is a time to be cautious and careful with your nest egg.
In this episode you will learn:
- The current shiny object investments being peddled on tv, radio, and the internet
- Why you shouldn’t invest in something you don’t understand
- The hidden dangers of “get rich quick” investment offers
- The dangers of chasing the hot stocks of the day
Shiny object investments are prevalent during challenging financial times. Beware of investment offers that sound too good to be true!
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Shiny object investments are on the rise. This episode is called the dangers of shiny object investments.
When we get into challenging financial times or a public health crisis, for example, it brings out the folks who are looking to create fear for you and to take advantage of you. And these are the people who are out there peddling the picks and the shovels for the gold rush or the impending disaster around every corner. And these are the folks who are really the only ones who are making money or getting rich off of the schemes. And unfortunately you, the general public are the ones who get taken advantage of. And so I've been hearing about a lot of these different shiny object investments lately, more than I've heard in a long time. And here are the, a few of them that I've heard about recently or seen commercials. I hear radio commercials, CTV commercials also have seen these things on the internet. So you need to be especially careful right now because they are everywhere. One of them was a pandemic innovation fund.
One of them, or several of them were real estate offers promising lofty payouts or some type of investment property offering. And they most always promise lofty payout or wealth or high income returns. Another one I heard was investing directly in oil and gas Wells. And then the new kid on the block is SPACs. These are special purpose acquisition companies, and these are run by sometimes a popular or well-known investor who raises money to buy private businesses and looks to maybe take one or two of those businesses public. And the promise is giving an investor access to an IPO. However, the reason why I think so many managers are rushing to set up a SPAC is because guess who this structure benefits the most, the manager. So it's very, very high risk and you need to be very careful about any of these types of investments that I've mentioned.
Another one I forgot to mention is metals, precious metals, gold bars, these types of things. So if it sounds too good to be true, it probably is. There's really no such thing as get rich quick. And these kinds of schemes are designed to make you really forget and ignore the inherent risks that come with these kinds of investments. And they're usually very significant. You'll usually find a lack of transparency about what the terms are, what the fees are. Are there any conflicts of interest that are hidden or embedded in these investments? Can your money be locked up for years or is it possible that you get taken immediately and your money is gone forever? And this happens a lot. You probably wouldn't believe how often. And a lot of times it happens to elderly people who really don't understand what they are investing in. So a good rule of thumb is if it sounds too good to be true, it probably is.
Don't ever invest in something that you don't understand and don't invest in something that is being touted or pedaled heavily on TV on the radio or online. These are just the telltale signs of a scheme or an investment that is very, very risky. There's another danger that I'm seeing right now as well. And this is more with retail investors who are chasing hot stocks, really popular stocks that are being bid up to astronomical levels. And part of the reason for this is that stock trading has become quote unquote free. Meaning there are no commissions charged to trade stocks. However, there is no such thing as a free lunch. These companies that offer free trading, that's great, but you're still paying to trade stocks. There are hidden costs. There are other costs that are part of trading stocks that just not seeing, but you're not really getting to trade stocks for free.
And this has caused investors to really roll the dice, to do lots and lots of trading and trading stocks is kind of like a bar of soap. The more you use the bar of soap and whittle it down, that's kind of like your, your nest egg and your portfolio. It will get smaller and smaller and smaller. It's very difficult to successfully trade stocks in the near term. So I don't want you to get burned. I remember back during the.com bubble, 1999, 2000, there was just an internet frenzy and everything you could think of was creating a website. Uh, one of them you might remember was pets.com. Everybody wanted to jump on the internet bandwagon. And at the time there just was not enough capacity to be able to do anything quickly online. So there was a real bottleneck in terms of the speed of access and the speed of service with online businesses.
And at the height of the enthusiasm, you had all kinds of investment companies rolling out pure internet funds, which kind of reminds me of what I've seen recently, the dangerous, shiny object investment of a pandemic innovation fund. That sounds a little sketchy to me, but these investment companies rolled out internet [email protected] bubble. And these funds inevitably lost 80 to a hundred percent of their value. Very soon after also, there was a time in my career where Dell Dell computer was an extremely popular and widely owned stock. And many of the employees who worked for Dell got the nickname, DeLeon heirs. They were DeLeon heirs. Well, I saw a lot of DeLeon EHRs go broke. And what happened was competition innovation. And this happens different companies do really well for a period of time. And then it's possible that a competitor does better and comes up with something new and different, and it causes the other company to either become obsolete or lose value, lose earnings, lose revenues.
And so you just have to be really careful about what you're investing in and not only does it apply to these off key investments that you might hear about on TV and on the radio. It also applies to the hot stocks of the day in history shows that what's hot today is typically not hot in the near future. Your best strategy is to find the appropriate asset allocation stocks, bonds mix for you utilizing high quality, very diversified funds, and not try to pick the hot stocks. And certainly don't pull money out of your nest egg and throw it into a risky, get rich, quick scheme or highly lucrative sounding investment that is probably going to lose money for you. You just need to be very careful today. If you play with hot, shiny object investments, it's like going to Vegas. So just be prepared if you're going to roll the dice like that to potentially lose it all. And I'm sorry to be so Frank about it, but, um, I'm just hearing about this way too much, not to talk about it in a quick episode. So there you have it, be careful out there, be prudent, be smart, and I'll be back with you next week.
This show is for informational and educational purposes only. Please do not consider any of the content as personalized financial investment tax or legal advice.
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