The Worst Investments You Can Make

Photo: Zach Klein

Generally, people love to talk about the best investments they have ever made, but we rarely hear about others talk about the worst investments they made. Good investments are those that maintain your principal and give you a positive return with time. The worst investments are those that burn through your principal and then continually pull money out of you without giving any return. The following are some of what I consider to be the worst investments. (See also: 7 Common Investing Mistakes)


Timeshares are set up by developers and hotel conglomerates to sell shared interest in their properties. They usually give great presentations where you can get a free stay at the property, and then they will try to sell you the right to use the property for a portion of the year. There is nothing wrong with this business model, but those who buy a timeshare directly from a developer should know that it is a terrible investment. First of all, the resale value of a timeshare is almost always lower than its original price. It's possible to find secondhand timeshares for 50% of the developer's price or even less on the resale market. Next, timeshares have maintenance fees that could be thousands of dollars every year. So if your intention for buying a timeshare is vacationing, it might be cheaper to just pay for the vacation yourself. If you don't use your timeshare for vacationing every year, then the money will be wasted. It is possible to rent out your deeded timeshares, but usually it is difficult to find a renter just for your time slot, and it's tough to recover all the fees you have to pay.

Penny Stocks

Penny stocks are stocks that are priced under $1 per share. They are usually at that price for a reason. The prices of these stocks are generally easier to manipulate because trade volumes are low. This is why there are many sites and marketers that promote penny stocks. If they get enough of a following, they can change the price of a stock on the open market and make it seem like it is easy money. The truth is that the promoters of the penny stock websites and mailing lists are the ones making the real money. There are legitimate penny stocks out there that appreciate suddenly, but to actually find them consistently can be difficult.

Badly Chosen Higher "Education"

It is often said that higher education is an investment in your future. However, there are many institutions of "education" out there that are nothing more than degree mills. Many of these schools accept nearly everyone who applies and leave the students with a pile of debt and low chances of employment in this competitive world. Recently there were several cases of students suing their alma maters after they graduated and were unable to find employment. I think more people should treat higher education as a financial decision and calculate the potential return before financing it with a huge student loan. It is fairly easy to look up the reputation of a school and the expected pay for your intended profession. If you do not choose carefully, then education funded by student loans might be the worst investment you could make, because student loans are not dischargeable.

Investments You Don't Understand

Many investments can be the worst investment you ever make if you don't do your research. For example, some investment products have fees and surrender charges that you need to clarify before you buy in. There are also investments such as rental properties or a small businesses that require you to put work into them to keep their existing yields. The bottom line is that you should get as much information as possible before putting any money down.

What are the worst investments you have ever made? Have you put money into any of the above and regretted it?

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Guest's picture

Cars are also a horrible investment. New cars are the worst followed by modifications to cars. Might as well throw all of that money away.

Guest's picture

I'm sorry, but cars are not an investment, they are a durable good. You are deriving value from it every time you drive it. Who buys a car, expecting to sell it in the future for a profit? It's not like a stock you put money into and let sit over time. Frankly, if cars were a worse "investment" than putting that money in stocks, everyone would be riding public transportation or walking.

Also, have you compared the price of new vs used cars recently? It was cheaper for me to buy a new car rather than a used one, as the triple disaster in Japan left markets with a shortage of new car inventory, which put pressure on used car sales and drove the price up.

Guest's picture

Cars are not investments, they are means of transportation. You use them to get from place A to place B.

As to the eternal new vs old debate, it depends on the car. For some car models it may be cheaper to buy a new one than an old one e.g. Toyotas, Hondas, etc. It also depends on the area. Most of comparisons are done on suggested retail price, and nobody pays suggested retail for a new car. Instead of blindly following a dogma, one needs to actually look at the prices in one area, negotiate and compare costs.

Xin Lu's picture
Xin Lu

Yeah I didn't write about cars because I figure most people don't buy cars expecting them to appreciate in value. However, people do expect timeshares & penny stocks to go up.

Guest's picture

Yes! Our worst investment was in a property that we can't sell and has homeowner fees near $1K a year. Anyone want to buy it? It's by a lake. :)

Guest's picture
Kris Remakel

For real, where is this property?

Guest's picture

my worst investment was starting a lingerie company at the age of 19. my partner was my career counselor at school and was banking on me to do all the work. our manufacturer was in brazil which was not only expensive but also impossible since neither one of us spoke portuguese. i was not a designer by trade and with only beginner's knowledge of the industry, we never went into production. filled with high hopes and entrepreneurial dreams, reality quickly set in.

the experience was a good life lesson, expensive, but good.

Guest's picture

Proprietary Colleges (For PROFIT "career schools") are nearly always a bad bet. An open admissions University may or may not be. For example, a Community College is a great way to get an education if you are broke and need to start somewhere. Yes, they take anyone, but they offer remediation for those who didn't do well or didn't care the first in high school, they offer training in technical areas as well as in traditional academic areas. In many states the academic courses are guaranteed to transfer to other 4 year Universities. This is a huge cost savings. CLEP tests can also help lower the cost of an education. Community Colleges often have better scheduling to meet the needs of working adults.

Finally, Congress passed new legislation helping to protect students from being given a non-marketable "degree" and from being saddled with loans for the same. I hope you will do a follow up post on this.

Guest's picture

Managed share funds can be a very poor investment. I watched a relative's actively managed fund suddenly perform badly because the firm involved changed share managers after the existing manager retired. It's success relied on their skills - that were apparently not transferred.

Not to say the right share manager can't make you a lot of money, but simple share index trackers - properly structured - reputedly do better than 75% of managed funds and the fees are vastly lower - hence their lack of popularity with investment firms who, naturally enough, would prefer you to invest in something more profitable for them.

Have a look at for a fuller explanation of the pros and cons.

Guest's picture
Matt C

The worst investment was a house I bought, flipped, and carried the paper. Then I forclosed when the buyer stopped making payments.
The buying, selling, and foreclosing processes all cost money. Then when I got it back I invested a bunch of money in it to fix it up. It's actually worth less than what I originally paid for it. I have thrown about a $100,000 down that hole. However it is a nice mountain cabin and I stayed there over Labor Day and enjoyed it. So a bad investment has turned into at least a nice vacation home.

Guest's picture

Gambling. You might as well flush your money down the drain

Guest's picture

Getting into real estate without researching every possible angle.

Guest's picture

I couldn't agree with you more on these worthless investments -- timeshare is the worst among these that you've mentioned.

Guest's picture

Timeshares are big business where I live, and I'm always amazed when they sell (and sell they do) with all the information available that prove what a bad investment they are.

Guest's picture

Any ETF that says 2x or 3x is a bad investment.

Guest's picture

I invested my money in Penny Stocks and after 6 months, I realized that it was a big mistake done by me. Marketer hide all cons of penny stocks and promised that my invested money will be double within 6 months. It was a big lie for me.

Guest's picture

Why do you use the word "investment" when speaking about timeshare? Timeshares are nothing of the sort. The fact that timeshares are usually sold by touts should make that clear. This also applied to newer versions of the same scam such as 'fractional ownership'. The best advice is NEVER buy a timeshare anywhere. It is a scam and the so-called timeshare you buy is sold over and over again to other people. It is very difficult to sell your timeshare now and renting isn't in the deal. It will cost you more to buy a timeshare and maintenance fee than to rent a hotel room or a full ownership of a condo. Don't do it.

Guest's picture
Amanda Blue

The first thing you need to watch out is the sales pitch. If the timeshare salespeople are overly aggressive, they are probably trying to scam you. They might also give you many promises, but without any written confirmation, therefore, do not believe everything you hear. Also, keep in mind that purchasing timeshares under construction might be a risky business. Before you buy, you need to be sure you are going to be able to use your timeshare every year. It is also very important that you take your time to do a thorough research on the company.