5 “Good Investments” That Are Actually Total Scams | The Financial Diet

Hey guys it’s Chelsea from The Financial
Diet and this week’s video is brought to you by creditrepair.com. Today I wanted
to talk a little bit about the good investments that you might have heard
about or thought about doing yourself that are actually kind of scams. Now
whether these are actual financial investments or they’re more career or
lifestyle the point is that they present themselves as a way to really almost
kind of hack your way into a better life or to a better result
but they can’t deliver on that promise. Now of course no matter what you’re
looking to do or invest in we always encourage you to do tons of research and
that can start with something as simple as typing in the name of the product or
service and the word review but even if you’re planning on doing tons of
research there are certain good investments that it’s probably best to
avoid altogether so let’s get right into them five good investments that are
actually total scams. Number one is for-profit schools. Now put very simply
for-profit schools are simply institutions of higher learning that are
profit seeking. They operate like businesses. You’ve probably heard of a
lot of them in your day to day life things like Strayer, DeVry, Phoenix, or
even Trump University which in its short lifespan managed to scam a lot of people. Now first of all these schools are often targeting lower-income students and
quite frequently students who would otherwise be looking at community
colleges and this is really predatory when you consider that the cost on
average of for-profit institutions is markedly higher than its not-for-profit
counterparts and having been a community college student myself who paid almost
literally zero each semester for tuition after the student financing and grants
that were available to me I can confirm that these prices are pretty damn
ridiculous compared to what you could be looking at with a community college but
it’s not just the raw cost it’s also the degree to which for-profit students are
encouraged to take out loans. In fact 96% of for-profit students end up taking out
loans and the default rate on those loans is three times higher than those
of not-for-profit students but it’s not just the cost as I said it’s also what
these schools are promising. These schools are often targeting students who
are looking for a very specific career path as opposed to just sort of general
higher education. They’re promising specific skills or
certifications that will immediately translate into better jobs and two
things are good to remember here. Number one is that multiple for-profit
universities have been taken into extensive lawsuits because they were
falsely inflating the actual number of hirings after graduation but the other
thing to consider is that most of the certifications and trainings that are
offered by a for-profit college are also available at community colleges so when
you think back to the cost difference it’s a no-brainer.
Now I’m someone who personally believes that everyone should consider starting
in a community college especially because even if you do want a four-year
or graduate degree most of those credits are transferable never forget that at
the end of the day these for-profit schools are just businesses they’re
looking to make money off of you and that’s not to say that other
institutions of higher education are not but it’s certainly not to the same
extent. When it comes to these for-profit schools do not be lured in by their
false and inflated promises. Do your research and you’ll find that there’s
almost none of them which are not drowning in negative reviews and often
lawsuits. Number two is social media MLM schemes. Now MLM stands for multi-level
marketing and basically it’s a sales situation in which people buy either the
right to sell a product and or the actual inventory of that product and
often are making more money by recruiting new people into the sales
structure rather than actually selling the products and while MLM schemes have
existed for a very long time, you might be able to recall for example the Avon
lady coming to your house and doing your mom’s makeup for half an hour, with the
advent of social media they have become easier than ever to get sucked into and
to be falsely convinced that they are an easy and efficient way to make a little
extra cash. If you have a Facebook account chances are you’ve probably seen
several of these MLM schemes whether it’s with makeup or workout gear or
health cleanses or whatever it might be and if you’ve seen them you’ve probably
noticed that it’s mostly women selling these products which is not an accident
MLM companies often target women specifically and more specifically than
that women in rural and suburban environments who do not have a ton of
access to easy employment opportunities. They often especially attempt to appeal
to part or full-time stay-at-home moms who may not be able to dedicate
themselves to a full-on in person job but want to make that
extra cash but when it comes to the actual numbers behind MLM schemes
they’re pretty damn shocking first of all 99% and yes it is actually 99% of
MLM recruits end up losing money because the vast majority of commissions end up
going to a very few top of pyramid structure promoters and on top of that
50% of representatives end up dropping out within a year and yet even with
those insanely bad numbers it continues to be a very very popular pursuit with
over 18 million Americans involved in one of these schemes at any given time
so not only do we encourage you to never get involved in one of these setups but
if you see someone you love who’s doing it talk to them. Don’t just show them the
information and the truly jarring statistics about these companies. Really
encourage them to look at the finances of working with them not just any money
they might be taking in on a day-to-day basis but that money compared to the
money that they’ve invested via either buying inventory the right to sell the
product or just dues and fees. Chances are if they’re actually working out that money it’s a net loss. Only you can prevent your Facebook feed from
devolving into a cesspool of scammy products. Number three is individual
stock picking. Now we’ve discussed this before on the channel but it’s so
important to really consider in the context of being a bit of a scam. There
is an entire industry that’s built on this idea that there are people who can
give you special insights into the performance of any given stock that will
help you outperform the market but statistically that is very much not true
and more importantly a feeling that you might have that the more involved and
active and the more insight you add to any given endeavor the higher it will
pay off for you is totally incorrect when it comes to investing and in fact
is one of the easiest ways to sabotage yourself. When it comes to investing
following the market setting it and forgetting it is very often the best way
to go. Even if you’re not paying a professional to help you pick these
stocks just doing them yourself is an easy way to shoot yourself in the foot. Well over half of individual stocks underperformed the market on a long
enough time frame now if you still do want to pick some individual stocks
first of all we recommend that it may a very small portion of your overall
portfolio ideally around 5% and if you do ever want to use your personal
insight or conviction you have to look at it the right way. It’s important to
remember that if you are ever going to buy a stock based on the prediction that
it will do well in the future it should never be about a short-term benefit
because chances are if you have access to that information so does the market
and it’s already been considered in that stocks market value. For example if
there’s a company you know is coming out with a really cool product in the next
few months that’s already priced into its value. When it comes to any kind of
personal convictions or insights think in the longer term for example you might
be thinking that a certain kind of renewable energy is going to be more and
more widely used over the next decade and that could be a good chance to use
some of your ideological convictions or personal insights to inform that
decision. In general investing is all about steady slow long term choices but
always understand that if you the individual investor has access to
information so does the market and if there’s ever a time when you actually do
have access to secret information that’s leading you to make a really valuable
investment choice that’s about to shoot up that’s illegal. That’s called insider trading and it’s why Martha Stewart went to jail. Number
four is cryptocurrency as get-rich-quick scheme. Now I know I’m setting myself up
for a bit of a flame war in the comments just by even mentioning the terms
cryptocurrency and scam in the same video but what I want to clarify here is
that cryptocurrency is not in and of itself a scam nor is blockchain
technology and it’s important to remember that those two are not the same
things I’m not going to bog you down with too much information but an easy
way to think of them is cryptocurrency is the actual currency being used and
blockchain is simply a technology that allows for an open publicly agreed upon
an unchangeable ledger of transactions that allow people to see the
transactions and more importantly the ownership of things. But cryptocurrency
is not in and of itself anything inherently bad or scammy and many people
do believe that it is an important tool for humans in the digital age to
interact with one another and for that reason many people invest in
cryptocurrency from an ideological perspective. They want it to become a
more more commonly used thing and know that
participating in it and buying into it will help that happen and there’s
nothing wrong with that especially if you can really afford to do it but what
is dangerous and scammy is the presentation or discussion of
cryptocurrency as a way to get rich fairly quickly or even as a relatively
solid investment for the average person and it’s not just the crypto brokers who
are doing this it’s also the people who generally evangelize the technology way
way past its reasonable financial expectations. Over the past few years
especially there have been cases of people mortgaging their homes or
liquidating most of their portfolios in order to buy in super-heavy and
cryptocurrency and these big spikes in the value of certain coins are leading
the average person to feel like it’s a super good opportunity to make a lot of
money in a short period of time and this plays on a really dangerous fallacy
that comes up over and over and over again in finances which is the idea that
something can be an extremely good valuable opportunity and also open to
everyone. When something sounds too good to be true as a financial opportunity it
usually is. Basically investing in cryptocurrency
is just speculation not really that different from speculating on the value
of individual stocks but there’s a big difference cryptocurrency is much more
volatile and risky. There’s not a lot of history to go off of for the trends in
value and the future of cryptocurrency for how it will be used in major
countries is still really uncertain and it’s because of this volatility that for
the average person it should not represent more than about 1% of your
overall portfolio and yes that sounds really low but that’s because it has to
be in order to counterweight all the huge risks you’re taking on by investing
in it 1% gives you a little wiggle room so that hey if it pays off really big
you’re glad you did it but it allows you to protect yourself against the
overwhelming chance that it won’t even if it’s something that you feel
very ideologically convicted in participating in because you do believe
that cryptocurrency is a large part of our future interaction only limit it to
what you can afford to lose. Number five is cleanses. Similarly to these MLM
schemes you’ve probably seen on your social media and sometimes they’re one
in the same you’ve probably seen a lot about these detoxifying cleanses that
you can get either by buying a specific product or by following a specific
diet they’re often seen as great investments in your health because
they’re supposed to cleanse you of impurities or reset your system or do
some sort of unspecified thing that often just results in weight loss. You
might have seen things like Ballerina or Flat Tummy Tea which spoiler alert are
laxatives or you might have seen something like waist trainers which are
essentially corsets that you’re for some reason supposed to workout in but when
it comes to these food products supplements and vitamins
you’re usually seeing them in the context of a cleanse. Now first of all
cleanses and that’s an incredibly vague and unscientific term are in no way
shown to incur weight loss. Usually the weight loss happens as a result of just
consuming fewer calories which you often do on these types of super restrictive
diets but more importantly there’s no evidence that these detox cleanses
actually remove toxins from your body almost everything that these cleanses
are attempting to accomplish are things that are already done by the organs in
your body and more importantly possible side effects of these extreme cleanses
and restrictive diets are things like dehydration, fatigue, weakness, and even
muscle atrophy. Even colon cleanses like enemas and certain laxatives have not
been proven to really help with the detoxification process which quite
frankly why would anyone want to do a colon cleanse just for the fun of it. But
it’s not just the bullshit pseudoscience which is reason enough to avoid these
it’s also that they’re often really expensive. A lot of these juice only
diets are ten dollars or more per bottle and insist that you drink several of
these every day. Many of the popular three-day cleanses offered on social
media are $200 a pop and the ones that send you prepackaged meals and
supplements that you have to follow strictly can be over $2,000 a month. Eating an overall healthy well-balanced diet of real foods, more based on produce
the better, is a good way to stay healthy and a cost-effective one. There is no
magical cleanse or diet that you can do to your body that will get rid of toxins
or make you lose weight for any other reason than your consuming way too few
calories. They can be very tempting with the before-and-after photos and the
celebrity endorsements and this overall idea that they’re a get-rich-quick
scheme but with your body just like financial investments though if it
sounds too good to be true it probably is. Whether it’s your body or your bank account there is no quick fix to getting what you want and so often the solutions
that matter for us in the long term are slow and steady and fairly unsexy and
one of the worst decisions you can make when it comes to your financial future
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description to learn more. As always guys thank you for watching and don’t forget
to hit the subscribe button and to come back every Tuesday and Thursday for new
and awesome videos. Bye! you

Paul Whisler

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