16 Investment Products I Avoid (And Why the Risk Often Isn’t Worth It)
Not all investments are bad. But not all of them are right for you, either.
The financial world is full of complex products. Many have high fees, hidden risks, and sales incentives that don’t always put the investor first.
Some are fine if you fully understand them. Most people don’t.
In the next sections, I’ll share why you should trust my take and then I’ll get into the investment products that I believe are usually more risky and/or costly then they are worth.
Table of Contents
Why You Should Listen to Me
I’m a Chartered Financial Analyst. For years, I managed an Investment Risk Team at one of the largest financial services firms in the country, serving over 7 million clients.
One of my responsibilities was sitting on the Investment Product Committee and various related Committees. We decided which investment products our firm’s financial advisors were allowed to offer clients. I had veto power.
We also restricted investment products based on a client’s risk tolerance and sometimes even at the advisor level. I reported directly to the Chief Risk Officer and ran the firm’s Investment Policy Committee.
I also had senior roles in the Research Area.
In short: I’ve seen what works, what gets abused, and what gets misunderstood.
This post isn’t investment advice. It’s a perspective from someone who has reviewed hundreds of products up close, with full access to the details and data that most investors never see.
My Philosophy: Keep It Simple, Make It Work
Personally, I lean toward Warren Buffett’s approach: Buy companies you can actually understand. Look for businesses with strong cash flow from operations, not hype, not hope, and not complicated products dressed up to sound smart.
Let me be clear. I did not restrict investment products based on my investment style. My decisions were based on the investment product’s risk profile, complexity, and fee structure.
Here are the investment products I avoid, and why you may want to think twice before buying in.
Leveraged ETFs: Risky Short-Term Investing Strategy
Leveraged ETFs aim to deliver 2x or 3x the daily return of an underlying index. They sound exciting, but they’re not built for long-term investors.
These funds reset daily, and their performance can drift far from the index over time. That “decay” effect means even if the market moves in your favor, you could still lose money.
Who Might Consider It: Day traders or very short-term tactical investors.
Risks: Compounding decay, volatility drag, extreme losses in choppy markets.
Why I Don’t Like It: Most people don’t understand how these work and they’re one bad week away from serious regret.
Related: CFA Institute: 20 Common Investing Mistakes That Could Crush Your Portfolio
Inverse ETFs: Dangerous Investment for Market Downturns
Inverse ETFs are designed to go up when the market goes down. They’re marketed as a hedge, but just like leveraged ETFs, they reset daily and don’t behave like a simple “short position.”
Even if you call the market correctly, you can still lose money due to compounding effects and volatility drag.
Who Might Consider It: Sophisticated investors with short-term hedging needs.
Risks: Timing risk, compounding decay, unintended losses in sideways markets.
Why I Don’t Like It: They feel like insurance but act like a bet. For most people, they’re a distraction from proper diversification.
Related: Warren Buffett’s Baseball Lesson That Shaped How I Invest (and Live)
Crypto: Speculative Digital Investment With No Cash Flow
I understand the utility of blockchain. But for most people trading crypto, the only real value is hope and hype. There’s no intrinsic value, no cash flow, and no liquidation value, just a story.
Like Warren Buffett, I prefer investing in businesses with real assets and operational cash flow. Crypto may end up being legit, but most of the trades people make in this space are just speculation.
Who Might Consider It: Investors with a high risk tolerance who treat it as a speculative allocation, not a core strategy.
Risks: Extreme volatility, lack of regulation, scams, no intrinsic value.
Why I Don’t Like It: It’s a bet on sentiment. There are better, more predictable ways to build wealth.
Related: I Retired at 42 Because I Never Spend Money on These Things
Structured Notes: Complicated Investment Products That Favor the Issuer
Structured notes are custom-built debt instruments. They often promise attractive returns based on specific conditions like “you’ll get 9% unless the S&P 500 drops more than 20%.” They’re often sold as a clever way to hedge or boost yield in uncertain markets.
But here’s the truth: they’re unnecessarily complicated. And the issuer, the bank or insurance company, structures the note in a way where they profit, not you. They’re using options strategies under the hood and capturing a good chunk of the upside.
If you’re looking for downside protection, you can achieve that by shifting to a more conservative allocation.
Who Might Consider It: Wealthy investors with strong diversification and a full understanding of options pricing.
Risks: Complexity, illiquidity, opaque pricing, capped upside, and counterparty risk.
Why I Don’t Like It: It’s a confusing way to accomplish something simple and the deck is stacked in favor of the issuer.
Radio Ads That Promise “Market Returns Without Losses”
You’ve probably heard them. Usually local radio ads or financial “gurus”:
“Our clients never lose money when the market crashes.” or “You can participate in the upside without risking your principal.” Usually the person “wrote a book”, which is really just disclosures.
They’re almost always talking about Fixed Indexed Annuities or Indexed Universal Life Insurance, products I’ll explain shortly.
Here’s the truth:
- Your upside is capped.
- The fees are often hidden.
- The surrender period can last a decade.
- And the people selling them earn large commissions.
These ads play on fear. They’re designed to sound like a secret your advisor won’t tell you.
Related: Investments Warren Buffett Avoids and Why They Still Matter
Variable and Fixed Indexed Annuities: High-Fee Insurance Investments
These are often pitched as “guaranteed growth with upside potential.” But they’re expensive. And the structure is built to favor the insurance company, not the investor. They use complex option strategies to deliver limited gains, while locking your money up for years with surrender charges.
I’m not against all annuities. But when the person selling it makes a commission, and you’re locked into a product you don’t fully understand, that’s a red flag.
Who Might Consider It: Investors who genuinely value guarantees and don’t mind paying high fees for them.
Risks: High fees, surrender charges, poor transparency, low liquidity, limited upside.
Why I Don’t Like It: The insurer makes the money. You’re paying a lot for a watered-down version of the market and you’re stuck in it for years.
Related: 17 Insurance Myths That Make Your Coverage More Expensive
Indexed Universal Life (IUL): Complex Investment Disguised as Insurance
IULs are often sold as a “tax-free retirement strategy,” combining life insurance with stock market participation. That pitch sounds good, but the reality is you’re paying for a complex product that delivers very modest returns after expenses.
Again, these are built to favor the insurance company. They limit your gains with caps and spreads while deducting internal policy charges that are rarely disclosed clearly.
Who Might Consider It: High-income earners who’ve already maxed out tax-advantaged accounts and fully understand the mechanics.
Risks: Complexity, high fees, lapse risk, underperformance vs. expectations.
Why I Don’t Like It: You’re getting a diluted version of stock market returns wrapped in layers of fees and complexity. The insurance company keeps the lion’s share of the upside.
Whole Life Insurance: Expensive Investment Alternative With Low Returns
Whole life is positioned as permanent insurance and a “forced savings” vehicle. The reality is, it’s a product meant to hedge against the loss of future income. When you’re young and have little in assets but a long income runway ahead, insurance makes sense.
But the financial expectation is like a see-saw. As your assets grow, your need for insurance should decline. Whole life doesn’t adapt to that. Instead, it keeps charging you more than term life for coverage you may no longer need.
Who Might Consider It: High-net-worth individuals using it for estate planning or very specific tax strategies.
Risks: High premiums, slow cash value growth, surrender charges, poor returns.
Why I Don’t Like It: Term life is cheaper, cleaner, and better aligned with actual risk. Whole life is a blunt instrument that’s usually sold, not bought.
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Target Date Funds: Overrated Investment for Long-Term Retirement
Target Date Funds seem simple: pick your retirement year, and the fund adjusts risk over time. But most investors don’t realize these come with higher expense ratios than similar index funds.
Worse, if you hold anything else in your portfolio, your actual asset allocation may not match your intended “target date” at all.
People assume these are set-it-and-forget-it. But the reality is: they’re easy to misuse, and they’re not cheap.
Who Might Consider It: Beginner investors using a single account for all retirement assets.
Risks: Overlapping allocation, higher costs, inappropriate risk level when used alongside other investments.
Why I Don’t Like It: Most investors don’t understand how they work and pay more than necessary for something they could manage more effectively with index funds.
Related: Should I Max Out My 401k? A CFA Who Retired Young Answers
Forex Trading: High-Risk Investment Few Can Win At
Forex is short for foreign exchange, trading currency pairs like the euro vs. the dollar. It’s highly leveraged, extremely volatile, and nearly impossible to predict. Yet countless retail investors jump in thinking they’ve found the secret to fast profits.
Let me put it plainly: If you think you’re smart enough to guess which direction entire economies will move, faster and better than professional traders with teams of economists and proprietary algorithms, you’re kidding yourself.
Who Might Consider It: Professionals with a background in macroeconomics or institutions with deep resources.
Risks: Leverage, extreme volatility, emotional decision-making, rapid losses.
Why I Don’t Like It: Most retail investors don’t stand a chance. It’s gambling dressed up as strategy.
Related: 25 Lessons Successful Investors Wish They Knew Sooner
Penny Stocks: Ultra-Speculative Investments With Big Downsides
The appeal is obvious: buy low, sell high, get rich. But penny stocks are almost always low for a reason. These are companies with questionable financials, poor liquidity, and little regulatory oversight.
Many are thinly traded or outright manipulated. They don’t trade on fundamentals, they trade on hype.
Who Might Consider It: Speculators who treat this like a lottery ticket with money they’re willing to lose.
Risks: Fraud, pump-and-dump schemes, lack of liquidity, permanent loss.
Why I Don’t Like It: The odds are against you. You’re betting on a bad business hoping for a miracle.
Related: How to Teach a Kid About Stocks: Easiest Way To Explain Stocks to A Kid
Commodities ETFs: Misunderstood Investments With Futures Risk
Buying gold, oil, or natural gas through ETFs seems like a smart hedge. But most of these funds don’t hold the physical asset, they buy futures contracts, which are constantly rolled over.
This creates something called “contango,” where your return can actually decline even if the underlying commodity price rises.
Who Might Consider It: Sophisticated investors using these for short-term tactical exposure.
Risks: Futures decay, tracking error, poor long-term performance.
Why I Don’t Like It: Most investors don’t understand how these work and they’re not as safe or simple as they seem.
We also made this related Video: Want To Beat Inflation?: 21 Things That Benefit From Rising Prices
Load Mutual Funds: Outdated Investment Products That Cost You More
Some mutual funds still charge a front-end “load,” or sales commission, when you buy in. These fees can be as high as 5.75%. There’s no reason for this anymore.
It doesn’t improve the fund’s performance, and you can get similar or better exposure for free using ETFs or no-load funds.
Who Might Consider It: Honestly, no one. There are better options.
Risks: Reduced initial investment, lower compounding, misaligned incentives.
Why I Don’t Like It: It’s a relic of a different era. Investors shouldn’t be paying to access products in today’s market.
Related: I’m a CFA Who Retired Early. Grant Cardone’s Financial Advice Makes No Sense
Crowdfunded Real Estate: Passive Real Estate Investing With Hidden Risks
The pitch: you can invest in real estate with just a few hundred dollars and own a slice of income-producing property. Sounds great. The reality? Many of these platforms are opaque, illiquid, and unproven in a down market.
You’re also trusting someone else to pick the property, manage it, and update you. If something goes wrong, you often have no exit option.
Who Might Consider It: Diversified investors allocating a small percentage to alternatives.
Risks: Lockups, platform risk, lack of transparency, poor liquidity.
Why I Don’t Like It: You get all the risk of real estate with none of the control or tax benefits.
Related: 19 Ways to Make Money in Real Estate Without Owning Property
High-Fee Mutual Funds: Active Investments That Rarely Beat the Market
Some actively managed funds charge 1%–2% annually in fees. To justify that, they’d have to consistently outperform the market by more than that, and most don’t.
Even worse, many of these funds just hug their benchmarks while still charging “active” fees.
Who Might Consider It: Investors seeking niche exposure with a proven fund manager.
Risks: High fees, underperformance, closet indexing.
Why I Don’t Like It: You’re often paying for marketing, not alpha. The data overwhelmingly favors low-cost passive investing.
Related: 25 Hidden Fees Draining Your Money (And How to Avoid Them)
Accredited Investor Products: Exclusive Investments That Underperform
Just because something is only available to “accredited investors” doesn’t mean it’s better. In fact, many of these products underperform, charge astronomical fees, and come with serious liquidity constraints.
Lockups are common. Some even include capital calls, meaning you could be forced to invest more later.
I used to work at a firm with 7 million clients. We offered private equity, hedge funds, and non-traded REITs to accredited investors. I forced for an education quiz and even a course, before we let people invest.
Who Might Consider It: Ultra-high-net-worth individuals who truly understand the risks and have liquidity elsewhere.
Risks: Long lockups, poor transparency, high fees, performance lag, capital calls.
Why I Don’t Like It: These products sound elite, but in practice, they’re often just expensive and inflexible ways to chase mediocre returns.
Before You Buy Into These Investment Products
None of this is to say that no one should invest in these products. Some people understand the risks and still choose to proceed, that’s fine.
But you deserve to know what you’re really getting into. Complex, high-fee products exist because they make someone else money, usually the issuer, the platform, or the advisor.
Before buying in, ask yourself: who’s profiting, and why?
I stick to investments that are easy to understand and have strong cash flow from operations. That’s been a core part of how I built wealth and retired early. I’m not smarter than everyone else, but I know when a product is working against me.
And that’s what I want you to avoid.
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