You don’t have to look very far to find all sorts of recommendations for investments you should own.
Turn on the TV, open the newspaper, or spend some time in front of a magazine rack, and you’re bombarded with investment recommendations competing for your attention and your dollars.
In fact, many pundits will gladly tell you which investments you should “Buy Now!”
Today, however, I want to offer another perspective. I’d like to list 9 investments I think you shouldn’t have in your portfolio.
Let’s get started:
- Investments that aren’t easy to keep track of. Don’t invest in anything that isn’t listed in the newspaper or where information isn’t readily and easily accessible – this generally limits your choices to stocks, mutual funds and ETFs. I’m partial to ETFs, by the way.
- Investments made in the absence of your personalized Wealthcare For Women financial master plan. Avoid any investment that isn’t integrated with your personalized wealth management plan. Don’t fall into the investment collection trap. Can you buy investments without a plan? Yes. Should you? No.
- “Can’t-miss” or “Sure Bet” Investments. Be wary of investments that sound too good to be true. They probably are. Remember, there’s no such thing as a free lunch.
- Insurance-based investments. Annuities and other insurance-type investments can be a component of a well-designed financial plan for a woman. However, most often, the costs of an investment wrapped in insurance far outweigh its benefits. And these costs aren’t just economic. You give up a lot of flexibility and control over your money when you invest in an annuity contract or variable life insurance policy.
- Proprietary investment products. Steer clear of any proprietary investment products. If your advisor works for a firm that is also creating and packaging investment products that are being recommended to you, just say no.
- Investments you don’t fully understand. Make sure you’re completely comfortable with and understand an investment before committing any of your dollars. Ask questions. Then, ask more questions. It’s your money and you need to understand where it’s invested and why.
- Non-liquid investments. If it’s not liquid, you don’t want it. It’s your money and you should be able to get to it if and when you need to. This is one of the potential problems with insurance-based investments that I mentioned above in #4. If you have to pay surrender fees or back-end charges or can only access your money during certain windows or after a set amount of time has passed, I’d be very cautious.
- Conventional thinking about investments. Beware group think and following the crowd. For example, 529 savings plans aren’t always the best vehicle to save for college. There can be better, more flexible options (thanks, @nathangehring). I need to do a financial “myth busters” post about this topic sometime.
- Friends & Family Investments. Also be careful if approached to invest in a business, investment opportunity or pet project by a friend or family member (thanks, @mjkimberley). These not only involve financial risk, but relationship risk as well.
Are there more than 9 investments you should avoid? Absolutely. I’ll tackle more of these in a future article, so join my email list to stay up to date.
OK, What’s Next?Now, here’s where you might expect me to tell you which investments you should include in your portfolio. Instead, I’m going to tell you to follow my Wealthcare For Women process which begins with you figuring out your “Why.”
Only after you’ve explored why you’re investing in the first place, can you (or your advisor) determine which investments are right for you. (Click here to tweet this)
And if you consider the fact that none of the talking heads on TV or journalists have the first clue about your personal “Why,” I think it’s silly to think that any financial or investment advice that they’re sharing could be appropriately personalized to your unique situation.
Now, I’d like to ask you for a quick favor. If you have any questions, feedback or other ideas for the list above, I’d love to hear about it in the comments below. Or, if you’d like to discuss your situation with me directly, pick up the phone and give me a call. I always love to hear from my readers.