Even smart people make the mistakes of investing on things they don’t understand, many of which can have huge risks and little hope of return on investments. You can see many examples of this in the crypto market.
In reality, the average person would be better off with an investment in index fund and exchange-trade fund (ETF), which captures the average returns of the market and provides a safer option in the face of inflation.
Resist the temptation to any investment that guarantees you a get rich quick return. Hedge funds only work well for the rich and those who are in the know. Many people are drawn to these options even if they don’t understand them because they don’t have the time to research and end up listening to the baseless opinion of others.
When it comes to investment, ask these five questions:
- What will it cost you?
- Are there better alternatives?
- Will it be easy to exit the investment? What are the fees and penalties?
- Are there any taxes?
- What is the worst case scenario you’re willing to accept?
Learn how to avoid doing dum things with your money here:
The Dumb Things Smart People Do with Their Money: Thirteen Ways to Right Your Financial Wrongs