We've been watching the Olympics; my son Alex and I love rugby. It is unbelievably rough and fast-paced. They don't even wear pads. The women's division is just as violent as the men's. We prefer to play less violent sports, such as, you guessed it, pickleball.
Our dryer broke, and in a house of six, that can quickly become a disaster. The clothes are piling up, and my son resorted to drying one piece of clothing at a time in front of his fan. Desperate times call for desperate measures. I think it's almost time to break out the clothesline. I'm not sure how our annoying HOA would feel about that.
My 12-year-old has become fascinated with computer programming. He's been going to camps all summer and is learning the "Python" computer language this week. He has been watching videos on YouTube that I don't understand. I have reached a point in my life where my kids know more about computers than I do
One of my favorite orchids is in bloom. It has eighty-four flowers (yes, I counted them).
Over the past twenty years, I have been introduced to myriad investment options for my clients. I am often approached by wholesalers who try to get me to invest their product into your portfolio. If the investment exists, I’ve looked into it.
The further into my career I get, the simpler my approach becomes. The power and consistency of large, established American company stock is hard to ignore. Investment-grade corporate and government bonds are also hard to argue against. Let’s look at some ideas pitched to me but haven’t passed muster.
Gold and Precious Metals:
Gold is often touted as a safe haven during economic uncertainty. However, its value can be volatile, and unlike stocks or bonds, it doesn't generate income. Gold doesn’t do anything. It just sits there. At least stocks produce dividends, and bonds produce interest. And don’t forget buying, storing, and selling gold has a significant cost.
Real Estate:
People continue to fight me on this one, but I rarely witness clients who make money in real estate. If you work with real estate as a full-time job, that can be different. However, owning a rental or two can be a massive hassle for a small return. Often, I talk to people who brag about how much they’ve made with their rental, but when we look at the costs and do the math, they realized less than a 5% per year return. A new roof or a bad tenant can set profits back for years. Yes, Sarasota rental owners hit the lottery over the past few years, but that is a once-in-a-generation event.
Art and Collectibles:
I’ve heard advertisements about investing in art, antiques, and other collectibles. It sounds glamorous, but the market is speculative, illiquid, and subject to subjective valuations, making it challenging to realize a profit. I run whenever someone tries to sell me an investment on the radio, TV, or internet. Really good investments sell themselves.
Cryptocurrencies:
Yes, some early adopters became fabulously wealthy, but Bitcoin values have stalled over the past couple of years. Some people love the risk. That's just not my style. Let’s consider some risks: legal status, cybersecurity threats, no recourse if you are scammed, irreversible transactions, lack of regulation, limited acceptance, and emerging competitive technologies. Other than that, it is perfectly safe.
Venture Capital and Startups:
Investing in startups can offer high returns, but most new businesses fail. This high-risk venture requires significant due diligence and a long-term perspective. Remember Pets.com, Webvan, eToys.com, Blockbuster, or Global Crossing? Their IPOs were exciting, but losing all your money was not.
Foreign Currencies (Forex):
Every country has its currency. People trade currencies to make money. They buy currency when they think it will increase in value and sell it when it goes down. Maybe they think the Euro will increase in value against the dollar or the yen will increase against the peso. I find this to be a crazy idea. It is literally gambling. I have no idea why anyone would do this.
Penny Stocks:
Penny stocks attract investors with the promise of significant gains, but they are often highly volatile, subject to manipulation, and lack the transparency of more established companies. This is another example of gambling. Researchers at the University of California, Berkeley, and Princeton University found that the returns on low-priced stocks are, on average, significantly lower than those of higher-priced stocks.
Timeshares:
Do I really need to explain this one?
Hedge Funds:
I’ve written entire articles on hedge funds. Still, the short version is this: They are heavily marketed as cutting-edge, super-fancy investments that use non-traditional strategies that will make you lots of money. However, studies have shown this to be mostly false. In my opinion, they are inferior to more traditional investments and charge exorbitant fees.
Commodities:
Imagine the current price of pork bellies is $0.80 per pound. Believing the price will rise, you buy a futures contract for 10,000 pounds at this price. A few months later, the price increases to $0.90 per pound. You sell the contract at the new price, making a profit of $0.10 per pound. With 10,000 pounds traded, your total profit is $1,000. Sound complicated and weird? It is. Stay away.
Leveraged ETFs:
This is a product whereby if your market goes up 25%, you get 50%, and if it goes down 25%, you lose 50%. The problem here is that if you lose 50%, it is very difficult to come back. If you are down 50% and then up 50%, you only have 75% of what you started with.
So, I encourage you to listen to Warren Buffett when he says, "Traditional stocks offer the enduring benefits of liquidity, transparency, and regulatory oversight that alternative investments often lack. Their proven track record makes them a cornerstone of any well-balanced portfolio."
Be Blessed,
Dave
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