In life, one of the quickest way to succeed is to take after those who have succeeded ahead of you. This is the reason why people spend thousands of hours studying the investment strategy of Warren Buffet.
For the rich knowing what not to invest in is as critical as knowing what to invest in. Therefore, there are investment that look like they will bring in a lot of money, but in the long run this is not the reality.
Therefore, in this article, we will look at 7 things that the rich never put their money into. This will give you insight about what the rich do that the average are not doing. These are the things stated out below.
The first in the categories of what the rich do not invest in is bonds. I know in my previous write up I stated that bonds are some of the investment that are there. But the truth is that the rich barely have anything to do with bonds and this is because of the following reasons:
Firstly, bonds attract low interest. Bonds doesn’t even keep up with inflation. It is estimated that bonds grow just 3% annually. For example, in Nigeria the bonds for the last 3years didn’t grow up to more than 2%. that is to say if you invest N50,000 you are likely to have 1% or not more than N1,000 as return on investment.
If bonds are low in returns, then why will anyone invest in it in the first place? Well, the truth is that bonds consist of lower risk than stocks, and they are more liquid. To this bonds are more like a wealth preservation tool than a wealth generation tool. This is why millionaires avoid putting their money in Bonds
2. Penny Stocks
A penny stock is defined as any stock in the stock market that goes for less than a certain amount let’s say N5- this is called a penny stock. Why do millionaires and the rich avoid this stocks like plague?
The first reason is because of their low value, they are not meant to register with the Security and Exchange commission(SEC). As such they don’t present their financial yearly report and in turn they have no financial oversight. Therefore, it makes their stock very unpredictable. Also another reason, is lack of Access to credible financial Information, as such millionaires avoid them. Lastly, penny stocks have low levels of liquidity, that means finding buyers for them can be challenging.
3. Digital Currencies
This is another investment that the rich avoid. One of the popular digital cryptocurrency is the bitcoin. Although some have made money in cryptocurrency investment, but the number of those who made money are far lower than those who have made money. Here are the reasons why millionaires don’t invest in digital currencies
Firstly, digital currencies are not government regulated, that means that there is no oversight in the activities of the companies running it. Also, they have no inherent value. They are just like penny stocks they raise and fall suddenly. In other words, their prices are speculative. Lastly, Digital currencies have high risks of Hackers and Theft. imagine putting in a lot of money into a platform that can easily be hacked.
4. Certificate of Deposit
These are financial products offered by banks or credit union with interest rate premium. The catch for this is that a customer will leave his money for a period of time. Well, this is not different with bonds, in the sense that certificate of Deposit doesn’t offer any substantial Returns and therefore it struggles with inflation.
Collectibles involves Art, Antiques, classic Cars, Wines, Comic and Stamps. This is a big business mostly in America. In America, these businesses are worth billions of Dollars.
However, regardless of how profitable they are, millionaires still avoid them. And the reason for this is that collectibles are the only worth what someone else is willing to pay for them. It means it doesn’t have its own worth. Another reason is that collectibles don’t generate income, like other assets. And the final reason why collectibles are avoided by the rich is because they are illiquid. They are very difficult to sell.
6. Precious Metals
A lot of people invest in gold because it is a security for economically down turn. Well, the reason for many not investing in gold is because they are illiquid. They are hard to dispose. Warren buffet calls gold a terrible investment.
7. Companies you don’t understand
By now you are aware that stocks is the investment that most millions go to. However, not all stocks are good investment. Many companies are involved in many things that make their companies complex. Therefore, in the wisdom of rich people they avoid such companies.