Investment analysts caution against certain retirement investments that are often too cautious or too ambitious and do little to earn much-needed funds.
Here are four of the least popular investments for retirees.
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1. Hoarding Cash
Parking thousands of dollars in a bank account is a rookie mistake, according to Forbes
. One study found that about 25 percent of Americans do this with their money, keeping that nest egg from earning.
“If you’re earning 1 percent on your money in a savings account, you’re arguably losing purchasing power every year due to inflation," certified financial planner David Blaylock of Fort Worth, Texas, told Forbes. "Growth isn’t even a possibility.”
2. Buying Penny Stocks
Stocks under $5 a share are described as "penny stocks." They are also sometimes called "micro-stocks." While they may seem affordable because of their costs, they are higher risk, Investopedia warns
. Very little information and history will typically exist for this type of stock. Many offer low liquidity, making them hard to get rid of.
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3. Owning Physical Gold
Experts urge caution when buying gold, according to Bankrate
. Gold can be a decent part of a thoughtful portfolio, but purchasing large amounts of physical gold, whether in coins or bullion is perhaps less responsible than late-night infomercials allow. Gold, while considered a hedge against inflation, tends to move against the dollar. When the dollar's value is low, gold prices are high.
4. Investing in Start-Ups
Venture capitalism sounds hip, but is often a wasteful strategy for investors. Doing proper research into a new company's finances is crucial, Entrepreneur reported
. Such investing, Entrepreneur warns, "offers no guarantee you’ll make a profit or even get your money back, so pay attention to the warning signs of predictable startup failure. Obtain the necessary documents and consult with a financial analyst if you have the time. Otherwise, stick with more established companies and avoid the 80 percent failure rate."
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