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The Worst Speculative Investments

By Mark Riddix

Everyone would like to be wealthy. The desire to build wealth can cause some people to invest in speculative ventures that are not very practical investments. Speculative investments can seem like bargains that will yield great returns. The truth is that many of these “investments” are not the gold mines that they are reported to be and can cause many investors to lose their money.

Let’s take a look at a few of the worst speculative investments:

Penny Stocks

Penny stocks are fool’s gold. They are bright, shiny, and look like great investments. Investors often find that these so called “cheap” investments are actually very expensive. A penny stock is a stock that trades in the single digits. Companies like Blockbuster and Circuit City were once penny stocks before declaring bankruptcy over the past two years. Penny stocks look like great values because of their low stock prices but these stocks often trade for $2 or $3 for a good reason. They are normally very flawed companies with lots of debt. These companies face the prospect of delisting, continued price drops, and bankruptcy. Penny stocks are investments that are best left to speculators.

Coins

Coin collecting is a great hobby but is a terrible investment strategy. The problem with coin collecting is that too many people do it. Millions of Americans engage in coin collecting. An important part of investing is to avoid following the crowd. The value of most hard assets is based on two things. One is the investment’s scarcity and the other is their usefulness. While coins are definitely useful, it is tough to find ones that are scarce. Also, because the United States Treasury and coin shops add a premium to the price of their coins, collectors often start in the red and have to hold a coin for years just to try and break even. When a collector finally does sell the coin, they often don’t get as much money as they should. Even with all this said, there are still some reasons to collect coins.

Sports Memorabilia

It would be great if we could all catch the 70thhome run ball hit by Mark McGwire or find a mint condition Michael Jordan rookie card. These items have value and could be sold to help you pay off your debt. Collecting sports memorabilia used to be a profitable hobby because sports enthusiasts could sell their collectibles for cash. Today, it is too difficult to make money selling memorabilia in the marketplace because are just too many people collecting sports memorabilia for the sole purpose of selling it.

Commemorative Items

Have you ever watched QVC or Home Shopping Network late at night and seen a host peddling commemorative plates or figures? These items are always pitched as investments that have the potential to increase in value. The truth is that very few of these items have any value outside of sentimental value to the collector. Items like these are fine to purchase, but just don’t expect them to finance your retirement dreams.

Are there any other items that you would consider speculative investments? Have you ever invested in one of these items only to see its value plummet? Have you succeeded in any of these speculative investments? I’d love to hear your stories!

(Photo credit: cnewtoncom)

Mark Riddix
Mark Riddix is the founder and president of an independent investment advisory firm that provides personalized investing and asset management consulting. Mark has written financial columns for Baltimore and Washington, D.C. area newspapers and is the author of the book, Your Financial Playbook.

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Comments

  • http://thecollegeinvestor.com Robert

    I couldn’t agree with you more about all this memorabilia stuff! One of my hobbies is going to estate sales, and you wouldn’t believe all of these random “collectible” items that people have amassed, but nobody will every buy them. If they do buy them, they sell for $1!

    Coin collecting can be profitable, but you had better know what you are doing. Do you really think that a dealer, whose job it is to make money selling coins, is going to sell you a $1 million coin for a few thousand! Never!

    • http://buylikebuffett.com/ Mark Riddix

      I agree Robert. It’s better if people think of these activities as hobbies instead of investments.

  • Kira

    Also: Beanie Babies.

    Knew of a couple who had twins several years ago and bought 2 of every Beanie Baby they could find and joked it was the twins’ college fund.. of course, at several dollars a pop, they’d actually have themselves a college fund now instead of a pile of toys.

    • http://buylikebuffett.com/ Mark Riddix

      LOL. Good one Kira.

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