The pandemic and the economic crisis did their job – people began to understand that bank deposits are not the best option for preserving and increasing capital. But the desire to get rich quick can play a cruel joke. Today we will talk about where a beginner should not invest money so as not to lose it.
Binary Options – Casino for Investors
At first glance, it seems that binary options are all about the stock market and investments. In fact, these are bets where the “investor” can only count on luck.
Binary options work like this: traders bet on the rise or fall of the price of a certain asset (dollar, euro, cryptocurrencies, precious metals) in the short term – usually transactions last from a minute to a day. If you’ve guessed correctly, the bet is returned with a premium. If not, you lose everything. It is reminiscent of bookmakers.
Some volatile and poorly logical securities traders compare to casinos. And binary options are literally them – this is a game with negative mathematical expectation: if you lose, you always lose more than you earn with a successful bet. According to the theory of probability, if you make a lot of bets, then 99.9% of the trader will be left with nothing. The casino always wins – even a super-lucky player will certainly lose his deposit at some point.
FOREX: the most complex and unpredictable market
FOREX is primarily an international currency market. Banks of different countries and large corporations make purchases and sales on it. There are also speculators on it – investment funds or large traders seeking to make money on changes in exchange rates.
For an ordinary person, FOREX is more of a gambling game for big money. It is not difficult to play it: you need to trade currencies with the expectation of the rise or fall of a particular pair. But winning is super difficult: exchange rates are unpredictable, and due to usually minor fluctuations, you have to work with a lot of leverage, which dramatically increases the risk. Yes, it is really possible to make money on FOREX, however, only a few professionals manage to do it.
HYIP projects: financial pyramids of the XXI century
High Yield Investment Program (HYIP) is a type of pyramid schemes. Their creators usually offer to invest in super-promising things: a mega-successful investment fund, unique innovative technologies, goods or services that are sure to take over the world if they attract a little investment.
In fact, investments in HYIP projects are equivalent to investments in financial pyramids. In theory, you can make a profit in them, but only if you are among the first investors, and after you the pyramid continues to recruit new investors who will provide you with payments. However, the majority are unlucky – having collected the required amount, the organizers sooner or later curtail their activities, and the investors lose their investments.
It is not so difficult to recognize HYIP pyramids: they usually focus on high and fast profitability (up to 5% per day!), As well as a guarantee of return and exclusivity of investments. At the same time, it is impossible to find non-anonymous requisites or contact details of the organizers, they do not have the necessary licenses (or they are fake), and the scheme for using investments is either opaque or complicated as much as possible.
Junk bonds – a million dollar chance
High yield bonds are often referred to as junk bonds due to the high risk of capital loss. But there is no deception in this way of investing. The investor should be aware that he is investing in companies that can bring profit and loss with a 50/50 probability.
As a rule, these are:
- A start-up business that cannot otherwise attract money for its development;
- A company experiencing difficulties in paying off current obligations, therefore, takes on new ones.
You can list a lot of successful companies today that started with the issuance of such bonds. In fact, any startup issue can be called junk. But some of them later grow into such giants as Tesla or Netflix, and some burn out. If you are sure that your intuition and analytical skills are enough, then you can take the risk. But the chance of not losing money is small enough.
ICO: digital fraud, from which no one can protect you
ICO (Initial Coin Offering) is an initial placement of tokens that resemble digital bonds: a company borrows money from investors, in return transferring tokens to a cryptocurrency wallet. It would seem that everything is clear and transparent – but in reality today there is virtually no state regulation of the ICO mechanism, which is typical for IPO and similar investment activities.
Because of this, the ICO market has been flooded with scammers and fake companies that have no business plan and no real product. Having collected money from gullible investors who believe in another blockchain project, they disappear and leave the latter with huge losses. Investors’ legislation does not protect in any way. Even if the company is a real one with an existing product, it may take years to reach profit and increase the price of tokens.