Conventional Investment Strategies That Are Surprisingly Hazardous
By now, daily readers and viewers of this page would have certainly become wealthy by the information we have provided to have some extra cash to save. Regardless of how much cash they have set aside, they usually seem to have more money to consider investment options. People are known to look out for lucrative and safe investment prospects. These are the kind of options that make us believe we are playing the system cleverly. But, sadly, that is not the case most of the times.
Well, we are always available to help you to become aware of what you may be getting into. We are not going to tell you not to abandon any of the options, if you have set your heart on it. We will only provide some suggestions for you to be cautious, profoundly alert and prepared for conceivably huge disappointments.
Investments In Real Estate
People living in rented accommodation at some point would have been told they would be better off becoming homeowners and Time has reported that nearly 75% of millennials consider it. After all, real estate is a physical object and therefore is more valuable than currencies. Money spent on rent is considered as costs that are sunk whereas any payments towards homeownership counts as an investment for the future. Millennial’s even utilizing the concept of crowdfunding for purchasing homes and business places is catching on quite rapidly.
Owning a home is definitely better than renting a place but it brings along a set of costs which have to be considered before making the investment. An average home takes about $1100 in maintenance costs apart from the time required for the maintenance. In contrast, average investments in blue-chip stocks can provide the investor nearly 4 times the value.
The housing crisis of the 80s dropped the value of properties by 23% and if a similar crisis occurred again the homeowner would be owing more on their mortgage than the value of their property especially when one considers that the year-long healing process is just 33%. Taking into account the additional problems which include the difficulty and the costs of selling a home, renting one is a safer bet as compared to the regular romanticism of owning a home as many of us would believe.
High Dividend Stocks
Let us consider that investors have still set their eyes on the stock market and rather than trusting some of the safer investments like mutual funds they prefer to target distinct stocks. They generally select stocks which will pay out better dividends that are paid quarterly according to the number of shares they own. The shareholder believes he or she will get their regular payments unless the value of the company fluctuates drastically causing it to sink.
While the payments received by investors may look attractive they can often act as a red flag for the company if they are extraordinarily high to attract investors. The dividends cut into the earnings of the company to drive share prices down. Extremely high dividends can also indicate that the company is in a nasty descending spiral and has not adjusted its rates of dividends. Simply put, the attractive dividends may absorb the company dry simply because it is making an attempt to attract new investors.
Investments in Gold Bullion
The value of gold has consistently increased for a number of years along with currencies but the dilemma is always the difficulty of storing gold bullion in private homes and expensive when the investor begins to feel a need for purchasing a lockbox or a safe. The costs mentioned will be after the gold has been purchased which means the investor is already facing a financial strain even before the precious metals arrive. Wouldn’t it be better to simply purchase gold bonds to bypass the expenses?
Here is the risk of investing in gold bullion. Investors may believe that gold will not diminish in value and therefore is a safe investment. However, government agencies have the power to confiscate gold held privately as it happened in the past when the US government issued the FDR’s Emergency Banking Act and ordered gold investors to return to precious metals to the government. The investors of the gold did receive compensation for the precious metals which they turned in. However, if governments have to initiate such actions it is unlikely that the money paid as compensation would have any value considering the nature of actions taken by the government.
As it can be seen people can certainly find a number of safe investments if they have extra cash in their hands. However, people are advised to consider the hazards mentioned because they are likely to encounter them regardless of how careful they have been when making the investments.
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