If you have any investments at all, you’re already ahead of many families. According to a recent Gallup poll, 62% of American households have some exposure to the stock market. [1]. That means simply owning a basic index fund puts you on solid footing.
But sometimes, investors go too far down the rabbit hole. Complex or exotic investment opportunities can seem appealing — even to seasoned investors — but many of them are more likely to destroy wealth than build it.
Here are three of the worst investments you can make — and why you should probably steer clear.
Timeshares are often marketed as smart investments. Sales pitches highlight “locked-in vacation costs” and “flexibility,” making it easy to believe you’re getting a slice of luxury real estate at a bargain.
But what’s often left out is that timeshares are notoriously hard to resell and are packed with hidden costs. According to a 2023 EY industry report, the average annual maintenance fee was $1,170 — and those fees tend to rise over time. [2]
Some buyers hope property values will rise to offset these maintenance costs, but the reality is they’re depreciating assets. “Timeshares almost universally lose 90% to 100% of their retail purchase value the instant they are bought,” said Brian Rogers of the Timeshare Users Group in an interview with Investopedia. [3] “Heck, sometimes it can even be more than 100% depreciation because many timeshares will charge owners hefty sums of money to take them back.”
If you’re interested in real estate investing, consider real estate investment trust (REIT). If you’re just looking to save on vacations, a good travel rewards credit card may be a better deal.
Read more: There’s still a 35% chance of a recession hitting the American economy this year — protect your retirement savings with these 10 essential money moves ASAP
Exchange-traded funds (ETFs) are generally a smart way to invest in broad indices or specific market sectors. But leveraged ETFs are a different story.
As the name implies, these ETFs use borrowed money to amplify returns — sometimes offering 2x or even 3x the daily performance of an index. While this can boost gains in the short term, it also magnifies losses.
Most investors also misunderstand how these products work. Leveraged ETFs are designed for short-term trading, not long-term investing. According to the U.S. Securities and Exchange Commission (SEC), their performance can diverge significantly from the underlying index over time — especially in volatile markets — due to daily rebalancing and compounding effects. [4]
For most investors, avoiding leverage entirely is the safer, more sustainable path.
There’s growing interest in private “exotic” assets like private equity, private credit, and digital assets. In fact, the U.S. Department of Labor under the Trump administration issued guidance in 2020 allowing limited access to certain “alternative assets” in 401(k) plans. [5]
On paper, these assets promise higher returns than traditional stocks and bonds. But in reality, those headline numbers often mask high fees, limited liquidity, and mixed historical performance.
As of May 2025, only two of the 14 private equity and venture capital funds tracked by Morningstar had outperformed the S&P 500 since inception. [6] Meanwhile, typical private equity fees include 1% to 2.5% in annual management fees — plus 20% or more in performance fees, according to Hamilton Lane. [7]
Private markets are also less liquid than public ones, so if investors want to move their money quickly, fund managers may struggle to sell underlying assets.
“If there’s a desire to pull out of private equity, there isn’t a way to actually sell that company or sell shares — there’s just no market for it,” said Charles Rotblut, vice president of the American Association of Individual Investors, in an interview with CNBC. [8]
For most investors, low-cost index funds offer greater transparency, lower fees, and easier access to your money when you need it.
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[1]. Gallup “What percentage of Americans own stock?”
[2]. EY “State of the Vacation Timeshare Industry 2023.”
[3]. Investopedia “Retail Shock: The Top Consumer Products That Lose Value Rapidly.”
[4]. U.S. Securities and Exchange Commission (SEC) “Updated Investor Bulletin: Leveraged and Inverse ETFs.”
[5]. The White House “Democratizing Access To Alternative Assets For 401(K) Investors.”
[6]. Morningstar “How Attractive Is Private Equity?”
[7]. Hamilton Lane Evaluating Private Equity Fee Structures.”
[8]. CNBC “Trump just signed an executive order that brings new investment options to 401(k)s — what it means for your money.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
