Monday, January 9, 2012

5 Investments to Avoid In 2012!

1.) Lottery Tickets. Lotteries were designed by politicians as a “patriotic” way to entice the poor into voluntarily returning their welfare checks back to the state. A 2006 Financial Planning Association survey found 21% of surveyed Americans think that winning the lottery represents the most practical way for them to accumulate several hundred thousand dollars. The odds of winning the Powerball Jackpot are 1 in 195 million and 1 and 5 million to win 200k. Even if the lottery returned 50 cents for every dollar bet, you’re better off at the Vegas Roulette tables that pay 95 cents for each dollar bet. Plus you get free drinks!

2.) Life Insurance, usually called whole life, variable life, universal life, permanent life, etc. I have a unique perspective on these products because I began my career with a large life insurance company. I know all the sales “tricks”, I know how much commissions these products pay, and I understand their inner workings (most financial folks don’t). While a “FEW” products are pretty good, MOST are terrible! These products are not “commodities”! There are only about 5 companies that sell respectable products, and the rest are JUNK! For some very high income earners and high net worth individuals, these products can be a great asset to own, BUT the vast majority of the public needs to stay away. If you are a high income earner, BEWARE of sales people that come to you calling it the “Rich Man’s Roth IRA! People that use this language are just “one trick ponies.” They do not analyze your entire financial situation to make sure it is truly a fit. They just want to sell you on the positives and leave out all the negatives. Get a 2nd opinion from a fee-only advisor (someone who does not sell products) that truly understands these complex products.

3.) Timeshares aren't an investment at all, since it makes ZERO sense to put money into a depreciating asset and expect a return! Most timeshare sales people don’t claim that they are quality investment these days, but they will still use subtle language during sales presentations to give the impression that purchasing a timeshare is a good financial move. If you don't listen carefully, you will think that this is a great investment when, in fact, it's far from it! If after reading this, you find yourself just “dreaming” about having a time share, buy it on the secondary market. They are really difficult to sell! So, there are many folks out there that have realized that they are terrible investments and are willing to sell at a deep discount. Check out timeshare resale websites and you can find the exact same units being sold at a discount of 50% or more.

4.) Any Investment Sold Over the Phone. Legitimate investments are never sold over the phone. Period! If their investment was as good as they say it is, and then they wouldn’t be spending their time talking to strangers like you on the telephone. Never buy anything over the phone because of the increased exposure to fraud.

5.) Too Good To Be True Investments. There is no FREE lunch especially when it comes to personal finance. There are a lot of financial sales people running around selling things like annuities, limited partnerships, and private investments. If you don’t understand the products, do NOT put your money there. Also, some investment guys will promise you the world. All I have to say it remember “Bernie Madoff!”

If you work with someone that is only paid by providing you with sound financial advice, NOT by selling you a product, more than likely you will not have to worry whether or not a recommendation is in your best interest. Call me for free initial consultation at 615-878-2134 or go to

*some data from Bert Whitehead, MBA, JD

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