We ranked the ways people lose money, from 1 (worst) to 5 (least bad). Informal deals that aren’t registered or limited to accredited investors are a 1, because they’re super risky. Crowdfunding is a 2. The deals aren’t necessarily bad, but crowdfunding platforms are probably charging you too much per share. Blind pool funds are a 3, mainly because your money is typically tied up for 7 to 10 years.
Startups are very risky, and unless you invest in a diversified portfolio of them, your chances of making money are slim. Oil and gas can make a lot of money, but you have to be very good at identifying the operator. In Tom’s legal career, he has seen many people lose money in oil and gas partnerships.
Key points
- Informal, unregistered deals are the riskiest (1).
- Crowdfunding (2) often means overpaying per share.
- Blind pool funds (3) can tie up money for 7 to 10 years.
- Startups need diversification, and oil and gas depends on the operator.
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