Investment is the most common way of earning passively. You can make money passively by investing in real estate, by investing in a Franchise business, by investing in stocks and bonds, and many other ways. But there are some investments which you should avoid because they involve a lot of risks and you could lose a lot of money in them.

This article will discuss four such types of investments in which you should never invest your money.

Types of Investments To Avoid

#1 Purposeless Cryptocurrencies

A virtual currency that adds value to a user’s life is a valuable cryptocurrency. For example, Bitcoin and Ethereum, the two most famous cryptocurrencies, are secure as well untraceable. So you can consider investing in them, but if you are planning. To invest in cryptocurrencies like dogecoin, which does not provide any value to its user and the value of which depends on a tweet of Elon Musk, you should change your planning and avoid investing in such purposeless cryptocurrencies.

The best example of a purposeless cryptocurrency is dogecoin which was just fun to appreciate creators on Reddit. Dogecoin became a meme and eventually gained its value tremendously after Elon Musk tweeted about it. After all, dogecoin is not adding any value to the life of its users, and its value highly fluctuates with just some tweets of Elon Musk, so it has a very high percentage of failure in the upcoming years.

#2 Futures and Options

Future and options are contracts signed by two parties trading in a particular stock at a predetermined value, and on a later date, they adjust profit and loss accordingly. It is a very complex financial term. I recommend you to watch videos on Youtube because its terms and conditions may differ in different countries if you want to understand the meaning correctly. It is just like gambling and is very risky, so you should avoid investing your valuable money in futures and Options.

#3 Avoid investing in a company that is entirely in debt

You should avoid investing in a company that is wholly sunken in debt. You can easily find it out that a company is in debt or not by simply calculating the ratio of its Total Assets and Total Liabilities. If your estimated value is less than 0.6, then it means that the company is entirely in debt, and investing in that company is hazardous. You could lose all your money in it because it has a very high probability that the company will liquidate soon. As you are not a secured creditor like a debenture holder, you will eventually lose all your money in it.

#4 Do not invest in Sunset sectors

Investing in Sunset sectors is the biggest mistake done by new investors. The industries that do not have much scope in the future means sunset sectors. You can lose all your money if you invest in sunset sectors. If the consumer does not demand their products in the future, then they will eventually shut down, and you will ultimately lose all your money in them.

For example, the Radio sector started moving towards sunset in the late ’90s. In the early 21st century, they vanish entirely from the market. Now, in the 3rd decade of the 21st century, almost everyone uses either smart tv, laptops, or computers, smartphones, and other digital devices.

You can also take the example of small handset phones, which were very popular in the late ’90s and early ’20s, but now no one uses that product, and every consumer demands smartphones of Apple and Samsung. Also, you may notice that many tech giants like Google, Amazon started in the mid-’90s, and now their owners are some of the wealthiest persons in the world. So in the third decade of the 21st century, you can also invest in the artificial intelligence business and become the world’s richest man in the upcoming years.

In the above examples, you might notice that when one sector is about to sunset, another industry is about to sunrise. A sunrise sector is simply the opposite of a sunset sector and has a lot of scope in the upcoming years.

In my opinion, companies dealing in petrol and diesel cars are about to sunset in upcoming years, and companies negotiating in electric cars like Tesla are about to sunrise in the forthcoming years.

Summary

Mainly there are four investments which you should avoid. They are:

#1 Purposeless Cryptocurrencies.

#2 Futures and options.

#3 Company entirely in debt.

#4 Sunset Sectors.

Conclusion

You can easily make a lot of money by investing in Index Funds, Mutual Funds, real estate, and many other sectors. But you should avoid investing in any company in debt, Sunset sectors, purposeless cryptocurrencies, and in future and options. You can also earn a lot of money and become one of the wealthiest persons in the world by investing in sunrise sectors like Artificial Intelligence and Electric cars.

Frequently Asked Question