Dangerous Online Investments- 2014 Edition

investInvesting can be great if you have the necessary funds as well as patience to learn the basics. However, there are also an increasing number of online investment opportunities that are not a good idea for beginners, and can even be dangerous.

Bitcoin

Bitcoin has become very popular for several reasons, including the fact that they offer complete anonymity. You can complete Bitcoin transactions without having to worry about your privacy, or of interference from private corporations or the government. The internet is full of stories of people who have purchased thousands of Bitcoins several years ago for sums such as $0.10 to $1 and now sold them for as much as $1,000 per piece. For this reason, interest in Bitcoin reached an all-time high. However, the problem is that the value of a Bitcoin is in the hundreds of dollars ($651 at the writing of this article) which means you’ll be putting significant amounts of money at stake if the value of the currency drops in the future.

In the past, there wasn’t much risk buying 1000 Bitcoins each $0.10 per piece. If the market tanked you lost almost nothing. Today, to buy just 1 Bitcoin you have to fork out $650. Obviously, in order to hope to make any gains, you will have to purchase more than one unit.

But what happens when today’s $650 the value of a Bitcoin starts plummeting?

The scenario of Bitcoin values decreasing is a very real one. Just in late 2013 the value of one Bitcoin decreased from $1,200 to around $400 in the matter of a few days. It can happen again.

Binary Options

Investing in binary options has also become a popular investment strategy for many. However, it appears that many people who invest in binary options have no idea what they’re doing. For this reason, the percentage of winning binary investors is extremely low industry-wide.

Binary options can be traded at so-called binary options brokers. These binary options brokers allow you to predict the movement of financial assets such as gold, silver, forex currency pairs etc. For example, if you believe that the value of gold will go up within the next 2 hours, you can bet a certain sum of money on this prediction.

If your prediction is correct, you win. If it’s not, you’ll lose 100% of your investment. For this reason, binary options are actually closer to betting rather than to investing.

Also, it’s literally impossible to accurately predict the movement of financial assets during extremely short spans of time. Even top-notch experts have an extremely difficult time achieving this.

For this reason, binary options are considered dangerous online investments by many experts.

Forex Trading

In forex trading, you will have to predict the future movement of various currency pairs such as USD/EUR etc. The difference between forex and binary options is that in forex you will not lose your entire investment if you make the wrong decision.

In case you have purchased a certain amount of USD at a given value and then if you sell while the value decreased with 10%, then you will obviously lose 10% of your investment. If you sell while the value of your asset increased with 10% then you will make a 10% profit. The average profit per winning trade in forex is around 10%.

The dangerous part about forex is that, similar to binary options, it’s not that easy to accurately predict the future movement of assets. Most of the time you will be investing by random and most (if any) winning you’ll be making will be by pure luck and chance.

Have you ever invested or lost money in any dangerous online investments?

About Holly

Holly Johnson is a wife, mother of two, and frugal lifestyle enthusiast. She is the co-founder of Club Thrifty and a staff writer at Get Rich Slowly, Frugal Travel Guy, and U.S. News and World Report's "My Money Blog." Holly has been featured in the Wall Street Journal, Kiplinger Personal Finance, Fox Business, and Daily Finance.

Comments

  1. The whole bitcoin concept just scares me, I have to admit. I’ll be staying away for a while, until it has more of a track record.

  2. I farmed some Bitcoins some time ago and I’m just letting them sit in my Bitcoin wallet. If the price skyrockets some day (in this case, I mean even more than it did in the midst of the recent Bitcoin frenzy) than I’ll have a nice little payday. If it goes “poof!” I’ll really not have lost anything, except a few CPU cycles. This is the sum total of my Bitcoin investing!

  3. I agree that Bitcoins sound scary. I will probably not be investing until it has been established as more of a solid and reputable currency. If then.

  4. You might as well head to a casino if you “invest” in binary options. It’s like Futures only more dangerous. I have never been a fan of bitcoin either. Great article. People need to know about this stuff!

  5. No, I haven’t tried to invest in online, but I heard and read about Forex Trading. It’s really difficult to take a risk because we don’t know when will the value would decrease.

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