It is foolish for investors to think they will never make a mistake while investing for their retirement. Take unadvertised fees, for example. Plenty of investors forget about unmentioned fees and invest in poor vehicles that are high risk and require hidden fees and maintenance. Do not get too frightened and invest too conservatively either. Just make sure you avoid the following investment vehicles while saving for retirement.

The 5 Worst Investment Vehicles

Whole-life insurance

A life insurance plan is a crucial part of investing for retirement. The problem comes when insurance is bundled together with your investments. Life insurance is not an investment! Investments make you money. Insurance costs you money, for the purpose of protecting your investments. Why is it a problem to bundle these things together in this way? Cash value policies have an effective rate of return that barely beats average inflation. To make matters worse, if something should happen to you, the policy value is cashed out, but the money in the investment is forfeit! And how much does this type of insurance cost? Ten times that of level term life insurance. Whole life is the payday lender of the middle class. If your financial advisor says anything about this product, run!

Penny Stocks

The North American Securities Administrators Association released a report in 1989 stating 70 percent of penny stock investors lose money. Keep in mind this came well before the Internet where they are pushed constantly as potential monster investments. I understand the attraction of low price buys, but they rarely pan out. I am curious to see a current set of stats considering people can buy with a click of a button now. Penny stocks will not make your retirement or life luxurious.

Private and Non-Traded REITs

According to AARP, a handful of the biggest ones raised approximately $26 billion by guaranteeing a return of 6.4 percent annually. All of them except for one lowered the share price and the dividends. Through comparison, the public REITs have increased by about 130 percent in the last five years, and they are also easily sold and fail to pay commissions. Steer clear of REIts.

Certificates of Deposit

According to Deseret First Credit Union in Logan, Utah, CD’s make right around 1%, and tie up your money for the term of the certificate. If you want to protect your funds from losses and you’re not too worried about making high returns, you’re better off putting your money in a savings account or a money market account, or even in a cookie jar – anything to keep your money accessible to you. If you intend to keep the money tied up in investments for longer than 5 years, mutual funds will offer strong enough diversification with a great deal of flexibility and high returns. CD’s really don’t offer an advantage over alternatives, no matter what the purpose of your savings.


Gold, oil, currency, corn, other non-manufactured goods constitute the commodities market. Futures and certificates on these items are incredibly volatile, representing enormous risk to the investor. In theory, the increase in risk accompanies an increase of potential reward, but realization of these rewards depends on bubble timing and market prediction – something investors are objectively bad at. Economists with advanced degrees in statistical analysis are still less accurate than your local weatherman, so in reality you have very little chance of making much money in these markets over a period of time. Even if you ride the roller coaster through the peaks and valleys, you’ll only average 5% in the gold market, versus 10% or more in securities. I stay away from FOREX for the same reasons.

Avoiding these five investments will make a big difference in how much you have to live off of when you retire. Research safe, positive investments and avoid the pitfalls above, and barring any major economic changes or crashes, workers can live out their golden years in relative comfort.

Leave a Response