Investments to Avoid in 2009

If you're going to invest in 2009, it's a good idea to know where NOT to invest, so I decided to do some research and make some predictions about where NOT to put your money.

PROPERTY

Okay, if you're looking at the long term, property is not a bad investment, but know that commercial property is something you should stay away from, at least for the near future. With business closings looming, the possibility of one of your rentors going belly up makes buying commercial property risky. Even residential property may be risky, as experts have month after month predicted that the housing market had bottomed out. Now some people are even predicting prices to fall as much as 30% further this year. Because of foreclosures, it is possible that larger multi-unit rental properties will not fall under these trends.

(Originally published at The Creating Wealth Blog on 1/14/09)

EUROPEAN MARKETS

The strength of the euro has made investing in Europe increasingly expensive, and especially so if you live in the United Kingdom, as the pound has taken a recent drubbing. Eastern European countries may not experience as much of a hit, as their cheaper production costs, including lower wages, are making them attractive to companies looking to economize.

BANKS & BONDS

The FDIC now protects the money you keep in banks up to $250,000, and U.S. government bonds are one of the safest investments you can make, but if you want to increase your wealth then putting your money in banks or bonds isn't the way to go this year (unless you live somewhere like South Africa, where rates for savings accounts are as high as 12%). Low interest rates on government bonds and on savings accounts in the U.S. and other major economies will probably make this a negative investment this year. On the up side, businesses able to offer credit should do well this year, as there is still a scarcity in credit markets even after the worldwide bailouts.

AUTOMOBILE MANUFACTURERS & AIRLINES

With consumers nervous, travel will be down. So too will large-scale purchases like automobiles, which will be put off or avoided, as will unnecessary travel. Airlines and automotive companies have gone begging the federal government for funds to keep them afloat, but their recovery this year is far from certain. Expect cheaper and subsidized modes of transport, such as public transportation, busses, ride share sites, etc. to experience increased usage. Oh, and pre-owned cars may also become fashionable.

INFORMATION TECHNOLOGY

IT spending is predicted to drop for the first time since 2002. With all major world economies hit by the worldwide economic slowdown, communications and computer equipment sales are slated to decline, though software sales may hold steady. Don't expect Microsoft to need a bail out any time soon!

INSURANCE & THE FINANCIAL MARKET

I qualify this. As per a previous blog, don't go into the market or buy insurance without doing thorough research. Though there are some who are predicting an upswing in markets worldwide later this year, this is far from certain. Use a trusted financial advisor or insurance agent to guide you toward the best places to put your money.

DERIVATIVES

Especially if you're a new investor, stay away from the derivative market, as they are "financial weapons of mass destruction” according to Warren Buffett. Leveraging large amounts of other people's money with only a fraction of it being your own might sound like a good monetary strategy, but like any form of investment, it's a gamble if you don't know what you're doing.