[MUSIC PLAYING] 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 a
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 it’s 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
American 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 make up 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
stock’s 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, and unchangeable
ledger of transactions that allow people to
see the transactions, and more importantly,
the ownership of things. The 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
and 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 it’s 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 in 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 and 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 work out 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 $10 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 you’re consuming
way too few calories. So it 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 is living with bad credit. And if you are someone who
is experiencing credit issues and wants to help fix it
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out creditrepair.com at the link in our
description to learn more. As always, guys, thank
you for watching. And don’t forget to hit
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