If you know anything about millionaires you'll know that they are avid investors
and in order to continue to build their wealth they must avoid investing in the
wrong things therefore in this video I will share with you the seven things
millionaires don't invest in so that you too can make great investing decisions
and become rich yourself in life one of the best ways to succeed is to take
after the lead of those who have succeeded before you and this method
certainly works for investing it is why thousands of people spend countless
hours studying the investment strategies people like Warren Buffett and Charlie
Munger funny enough these investing moguls
also took their investing strategies from those who came before them for
instance warren buffett investing strategy was learned through his teacher
and the author of the book the Intelligent Investor Benjamin Graham
Benjamin Graham was known for being diligent almost surgical in his
financial evaluation of companies his experience led to simple effective logic
upon which Graham belt a successful method for investing this oldest say
that investing is an intricate art and knowing what investments to avoid is
just as important as doing which you should invest in well some commonly
thought of investments can seem like winners when trying to grow your wealth
the reality is that some can actually cost you money in the long term making
them things you most definitely should avoid so which investments in particular
do billionaires avoid investment number one bonds well it's true that a lot of
millionaires do hold some bonds in their portfolios this type of investment tends
to be avoided when millionaires try and maximize their wealth the first issue
with bonds is that their returns are generally much lower than what you could
realize by investing in stocks instead in fact many buttons barely keep up with
inflation earning on average just 3% annually for example in the past three
years in the United States the average inflation rate has been just over 2%
annually which means that on a $50,000 investment you would be ahead 1% or
pharmd dollars as a net return so if bonds have such low yields why would
anyone invest in them in the first place the truth is that bonds are generally
lower risk investments in stocks and are rather liquid meaning that if you want
to dispose of them then you can get your money
fairly quickly moreover bonds tend to pay interest making them income
generating assets unfortunately their low yields make them more of a wealth
preservation tool than a wealth generation tool which is why
millionaires tend to avoid putting large sums of money into this type of
investment investment number two penny stocks any stock that trades on the
stock exchange for less than five dollars per share is considered a penny
stock and millionaires avoid them like the plague millionaires avoid this type
of investment for a few important reasons first companies who trade low
value shares are not required to register with the Security and Exchange
Commission commonly referred to as SEC and do not have to present them their
annual reports in essence this means that there is no oversight into the
validity of the financial information these companies are reporting making
them very volatile investments moreover having a lack of access to credible
financial information makes it very challenging for investors to get a sense
of the true value of their holdings which is an important factor of
millionaire investing decisions now sure these types of stocks do have the
potential for exponential gains and significant returns for investors who
want to gamble on these unproven companies but millionaires know that
penny stocks are bound to fall another recent penny stocks make for bad
investments is due to their low levels of liquidity because most people don't
invest in these types of shares finding a buyer for a stock you own can be
challenging while most popular stocks are traded thousands of times a day
penny stocks are bought and sold less often which also affects their price
which is another downside of penny stocks holding investments that are
volatile in price makes it hard to gauge the true value of your holdings and can
make investing very stressful as you see your money rise and dip to extreme
levels over time so for these reasons millionaires do not invest in penny
stocks investment number three digital currencies for the last few years all
anyone has talked about was Bitcoin and other popular cryptocurrencies but this
type of investment tends to be avoided by millionaires now I would be lying if
his said that there weren't people who made millions investing in
cryptocurrencies but these people are far and few
between the first problem with digital currencies is that they aren't
government regulated this means that there is no oversight into how the
companies behind them are operating which can be scary if you were investing
large sums of money into them the second problem with cryptocurrencies is that
they have no inherent value their price is totally speculative kind of like
penny stocks which makes the price spike when there is hype around them and
prices draw when attention cools off for instance when Bitcoin received a
ridiculous amount of attention in December 2017 the price of a single
Bitcoin rose to over seventeen thousand dollars USD then as the tension moved
away from Bitcoin the price began to decline an investor's saw there once
bo-lieve equipped a currency trading at just over three thousand dollars USD one
year after its peak finally unlike normal investments digital currencies
are at risk of hackers and theft take the example of BitFenix a Bitcoin
exchange company in 2016 the platform was hacked resulting in depositors
losing over 70 million dollars sadly this instance is not uncommon
I was highlighted in the US Department of Homeland Security study roughly
one-third of all Bitcoin exchanges have been hacked at one point or another so
if you add up all these elements and the fact that cryptocurrencies don't produce
income like investment properties or dividend shares do there's no wonder why
millionaires seldom use digital currencies as a primary investment
vehicle investment number for certificates of deposit another
unpopular investment of the rich are certificates of deposit if you're
unfamiliar with certificates of deposit or CDs for short then let me explain
what they are a certificate of deposit is a product offered by banks and credit
unions that offers an interest rate premium in exchange for the customer
agreeing to leave a lump-sum deposit untouched for a predetermined period of
time essentially you're trading access to your money for interest income
unfortunately CDs have the same main disadvantages bonds they don't offer
very substantial returns meaning that again you will struggle to fight
inflation by investing in them in fact as of September 2019 the highest CDs
only of the 2.25 percent annually one upside to certificates of deposit is
that tend to have shorter terms and bonds
meaning that you can get a similar return while being without access to
these funds for a shorter period of time which equates to less risk while CDs
aren't a terrible investment millionaires expect higher returns and
rely on these returns to build their wealth faster which twice certificates
of deposit aren't the investment of choice of the rich investment number
five collectibles the next type of investment millionaires
avoid are collectibles collectibles include things like art antiques stamps
classic cars wine and comic books and believe it or not they are big business
according to a report by Deloitte the market for collectibles was stranded
sixty-two billion dollars in 2012 and it was expected to grow year-over-year
but even with this expected gross millionaires still shy away from putting
their money into collectibles for a few reasons
first collectibles are only worth what someone else is willing to pay for them
meaning that there is no real defined price for these assets Connelly
cryptocurrencies the assets value is based on how much other people's
perceive it to be worth rather than having a real monetary value associated
with it this means that that nice painting you own may be worth a lot to
you but it is worth nothing unless you have a buyer willing to part with their
money for it and add to this issue unlike stocks and bonds there is usually
little public information available for individual collectibles making the
valuation process that much harder the second reason the rich don't use
collectibles as investments is because they don't generate income sure a
painting is nice to look at but it won't fill your pockets on a monthly basis
making it a less than ideal investment to hold probably the biggest downfall of
collectibles as an investment is how ill acquit a for instance it takes the right
kind of buyer to want to spend thousands of dollars on an antique car or comic
book collection meaning that if you want to part with your collectibles in order
to recoup some cash you may be waiting awhile until those funds are received in
short while growing a collection of valuable items can be fun they
definitely don't make the best investments investments precious metals
the sixth thing that a lot of wealthy people do not invest in are precious
metals and more specifically gold now I get why some people would want to invest
in precious metals generally speaking gold and other
precious metals can act as a kind of safeguard against economic downturns
this is because precious metals tend to have an inverse relationship with the
stock market simply put when the prices Docs and bonds go down gold and other
precious metals tend to go up and when stocks are on the rise precious metals
decline in value you may be thinking well isn't it smart to have investments
that will offset any losses that may experience well in theory this makes
total sense the reality is that precious metal prices don't typically go up
enough to make up for the losses that you would experience in an economic
downturn making them quite lackluster as a hedging tool the other issue with
holding precious metals is that like most of the other investments we've
discussed in this video they're rather illiquid again if you were in a
financial bind anied money selling off these assets that may be harder than you
would expect leaving you without the cash you need and if you need more of a
push to avoid this type of investment you should know that investing king
warren buffett thinks that gold is a terrible investment Buffett believes
that stocks are a much better investment and often highlights just how much
better returns on stocks have been in the past verses it's precious metal
counterpart for instance if you invested ten thousand dollars in both gold and
stocks in 1942 the value of your gold will be now worth four hundred thousand
dollars now this seems like great return but the same $10,000 invested in stocks
would be worth a cool 51 million dollars today proving just how powerful stock
investing can be therefore for these reasons wealthy people tend not to
invest in precious metals investment number seven companies you don't
understand at this point you've probably come to the conclusion that stocks are
the type of investment that millionaires gravitate to but not all stocks make for
a good investment this is because there are many companies that trade on the
stock market that are so complex that the majority of investors can't even
comprehend what business the company is in in fact experienced investors like
Warren Buffett won't invest in most stocks because the help complex they can
be and he's been investing for longer than most people have been alive Buffett
preaches the importance of investing only in companies you understand and he
practices this himself by restricting his investments to those that fall
his circle of competence his circle of competence is where as investing
expertise lies and only businesses that fall into this circle are considered for
investment Buffett makes the argument that if you don't understand the
business how can you project performance for
example Buffett did not suffer greatly when the tech bubble burst back in the
early 2000s because he was not heavily invested in dot-com stocks in short
investing in Sox is a powerful tool for growing your wealth but your investment
should be limited to the companies that you understand in conclusion if you want
to start investing like a millionaire then you must avoid putting your money
into bonds penny stocks digital currencies certificates of deposit
collectibles precious metals and finally companies you don't understand it thanks
for watching if you want to go from the life you have to the life you deserve
then hit the subscribe button now
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