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Hey, guys. It's Chelsea from The Financial Diet.

And this week's video is brought to you by creditrepair.com. Today I wanted to talk a little bit about the good investments that you might have heard about or thought about doing yourself that are actually kind of scams. Now, whether these are actual financial investments or they're more a career or lifestyle, the point is that they present themselves as a way to really almost kind of hack your way into a better life or to a better result, but they can't deliver on that promise.

Now, of course no matter what you're looking to do or invest in, we always encourage you to do tons of research. And that can start with something as simple as typing in the name of the product or service and the word review. But even if you're planning on doing tons of research, there are certain good investments that it's probably best to avoid altogether.

So let's get right into them. Five good investments that are actually total scams. Number one is for-profit schools.

Now, put very simply, for-profit schools are simply institutions of higher learning that are profit seeking. They operate like businesses. You've probably heard of a lot of them in your day-to-day life-- things like Strayer, DeVry, Phoenix, or even Trump University, which in its short lifespan managed to scam a lot of people.

Now first of all, these schools are often targeting lower income students, and quite frequently, students who would otherwise be looking at community colleges. And this is really predatory when you consider that the cost on average of for-profit institutions is markedly higher than it's not-for-profit counterparts. And having been a community college student myself who paid almost literally zero each semester for tuition after the student financing and grants that were available to me, I can confirm that these prices are pretty damn ridiculous compared to what you could be looking at with a community college.

But it's not just the raw cost. It's also the degree to which for-profit students are encouraged to take out loans. In fact, 96% of for-profit students end up taking out loans.

And the default rate on those loans is three times higher than those of not-for-profit students. But it's not just the cost. As I said, it's also what these schools are promising.

These schools are often targeting students who are looking for a very specific career path, as opposed to just sort of general higher education. They're promising specific skills or certifications that will immediately translate into better jobs. And two things are good to remember here.

Number one is that multiple for-profit universities have been taken into extensive lawsuits because they were falsely inflating the actual number of hirings after graduation. But the other thing to consider is that most of the certifications and trainings that are offered by a for-profit college are also available at community colleges. So when you think back to the cost difference, it's a no brainer.

Now, I'm someone who personally believes that everyone should consider starting in a community college, especially because even if you do want a four year or graduate degree, most of those credits are transferable. Never forget that at the end of the day, these for-profit schools are just businesses. They're looking to make money off of you.

And that's not to say that other institutions of higher education are not, but it's certainly not to the same extent. When it comes to these for-profit schools, do not be lured in by their false and inflated promises. Do your research, and you'll find that there's almost none of them which are not drowning in negative reviews and often lawsuits.

Number two is social media MLM schemes. Now, MLM stands for Multi-Level Marketing. And basically, it's a sales situation in which people buy either the right to sell a product and/or the actual inventory of that product, and often are making more money by recruiting new people into the sales structure, rather than actually selling the products.

And while MLM schemes have existed for a very long time-- you might be able to recall, for example, the Avon lady coming to your house and doing your mom's makeup for half an hour-- with the advent of social media, they have become easier than ever to get sucked into, and to be falsely convinced that they are an easy and efficient way to make a little extra cash. If you have a Facebook account, chances are you've probably seen several of these MLM schemes, whether it's with makeup or workout gear or health cleanses or whatever it might be. And if you've seen them, you've probably noticed that it's mostly women selling these products, which is not an accident.

MLM companies often target women specifically. And more specifically than that, women in rural and suburban environments who do not have a ton of access to easy employment opportunities. They often especially attempt to appeal to part or full time stay at home moms who may not be able to dedicate themselves to a full on in-person job, but want to make that extra cash.

But when it comes to the actual numbers behind MLM schemes, they're pretty damn shocking. First of all, 99%-- and yes, it is actually 99%-- of MLM recruits end up losing money, because the vast majority of commissions end up going to a very few top of pyramid structure promoters. And on top of that, 50% of representatives end up dropping out within a year.

And yet even with those insanely bad numbers, it continues to be a very, very popular pursuit, with over 18 million American involved in one of these schemes at any given time. So not only do we encourage you to never get involved in one of these setups, but if you see someone you love who's doing it, talk to them. Don't just show them the information and the truly jarring statistics about these companies, really encourage them to look at the finances of working with them.

Not just any money they might be taking in on a day-to-day basis, but that money compared to the money that they've invested via either buying inventory, the right to sell the product, or just dues and fees. Chances are, if they're actually working out that money, it's a net loss. Only you can prevent your Facebook feed from devolving into a cesspool of scammy products.

Number three is individual stock picking. Now, we've discussed this before on the channel, but it's so important to really consider in the context of being a bit of a scam. There is an entire industry that's built on this idea that there are people who can give you special insights into the performance of any given stock that will help you outperform the market.

But statistically, that is very much not true. And more importantly, a feeling that you might have that the more involved and active and the more insight you add to any given endeavor, the higher it will pay off for you, is totally incorrect when it comes to investing, and in fact, is one of the easiest ways to sabotage yourself. When it comes to investing, following the market, setting it, and forgetting it is very often the best way to go.

Even if you're not paying a professional to help you pick these stocks, just doing them yourself is an easy way to shoot yourself in the foot. Well over half of individual stocks underperformed the market on a long enough time frame. Now, if you still do want to pick some individual stocks, first of all, we recommend that it make up a very small portion of your overall portfolio-- ideally around 5%.

And if you do ever want to use your personal insight or conviction, you have to look at it the right way. It's important to remember that if you are ever going to buy a stock based on the prediction that it will do well in the future, it should never be about a short term benefit. Because chances are, if you have access to that information, so does the market, and it's already been considered in that stock's market value.

For example, if there's a company you know is coming out with a really cool product in the next few months, that's already priced into its value. When it comes to any kind of personal convictions or insights, think in the longer term. For example, you might be thinking that a certain kind of renewable energy is going to be more and more widely used over the next decade.

And that could be a good chance to use some of your ideological convictions or personal insights to inform that decision. In general, investing is all about steady, slow, long term choices. But always understand that if you the individual investor has access to information, so does the market.

And if there's ever a time when you actually do have access to secret information that's leading you to make a really valuable investment choice that's about to shoot up, that's illegal. That's called insider trading, and it's why Martha Stewart went to jail. Number four is cryptocurrency as get rich quick scheme.

Now, I know I'm setting myself up for a bit of a flame war in the comments just by even mentioning the terms cryptocurrency and scam in the same video. But what I want to clarify here is that cryptocurrency is not in and of itself a scam, nor is blockchain technology. And it's important to remember that those two are not the same things.

I'm not going to bog you down with too much information, but an easy way to think of them is cryptocurrency is the actual currency being used, and blockchain is simply a technology that allows for an open, publicly agreed upon, and unchangeable ledger of transactions that allow people to see the transactions, and more importantly, the ownership of things. The cryptocurrency is not in and of itself anything inherently bad or scammy, and many people do believe that it is an important tool for humans in the digital age to interact with one another. And for that reason, many people invest in cryptocurrency from an ideological perspective.

They want it to become a more and more commonly used thing, and know that participating in it and buying into it will help that happen. And there's nothing wrong with that, especially if you can really afford to do it. But what is dangerous and scammy is the presentation or discussion of cryptocurrency as a way to get rich fairly quickly, or even as a relatively solid investment for the average person.

And it's not just the crypto brokers who are doing this. It's also the people who generally evangelize the technology way, way past it's reasonable financial expectations. Over the past few years especially, there have been cases of people mortgaging their homes or liquidating most of their portfolios in order to buy in super heavy in cryptocurrency.

And these big spikes in the value of certain coins are leading the average person to feel like it's a super good opportunity to make a lot of money in a short period of time. And this plays on a really dangerous fallacy that comes up over and over and over again in finances, which is the idea that something can be an extremely good, valuable opportunity, and also open to everyone. When something sounds too good to be true as a financial opportunity, it usually is.

Basically, investing in cryptocurrency is just speculation, not really that different from speculating on the value of individual stocks. But there's a big difference. Cryptocurrency is much more volatile and risky.

There's not a lot of history to go off of for the trends in value, and the future of cryptocurrency for how it will be used in major countries is still really uncertain. And it's because of this volatility that for the average person, it should not represent more than about 1% of your overall portfolio. And yes, that sounds really low, but that's because it has to be in order to counterweight all the huge risks you're taking on by investing in it. 1% gives you a little wiggle room, so that hey, if it pays off really big, you're glad you did it.

But it allows you to protect yourself against the overwhelming chance that it won't. Even if it's something that you feel very ideologically convicted in participating in, because you do believe that cryptocurrency is a large part of our future interaction, only limit it to what you can afford to lose. Number five is cleanses.

Similarly to these MLM schemes you've probably seen on your social media-- and sometimes they're one and the same-- you've probably seen a lot about these detoxifying cleanses that you can get either by buying a specific product or by following a specific diet. They're often seen as great investments in your health, because they're supposed to cleanse you of impurities or reset your system or do some sort of unspecified thing that often just results in weight loss. You might have seen things like Ballerina or Flat Tummy Tea, which spoiler alert, are laxatives.

Or you might have seen something like waist trainers, which are essentially corsets that you're for some reason supposed to work out in. But when it comes to these food products, supplements, and vitamins, you're usually seeing them in the context of a cleanse. Now first of all, cleanses-- and that's an incredibly vague and unscientific term-- are in no way shown to incur weight loss.

Usually, the weight loss happens as a result of just consuming fewer calories, which you often do on these types of super restrictive diets. But more importantly, there's no evidence that these detox cleanses actually remove toxins from your body. Almost everything that these cleanses are attempting to accomplish are things that are already done by the organs in your body.

And more importantly, possible side effects of these extreme cleanses and restrictive diets are things like dehydration, fatigue, weakness, and even muscle atrophy. Even colon cleanses, like enemas and certain laxatives, have not been proven to really help with the detoxification process. Which quite frankly, why would anyone want to do a colon cleanse just for the fun of it?

But it's not just the bullshit pseudoscience, which is reason enough to avoid these. It's also that they're often really expensive. A lot of these juice-only diets are $10 or more per bottle, and insist that you drink several of these every day.

Many of the popular three-day cleanses offered on social media are $200 a pop. And the ones that send you prepackaged meals and supplements that you have to follow strictly can be over $2,000 a month. Eating an overall healthy, well-balanced diet of real foods-- more based on produce the better-- is a good way to stay healthy, and a cost effective one.

There is no magical cleanse or diet that you can do to your body that will get rid of toxins or make you lose weight for any other reason than you're consuming way too few calories. So it can be very tempting, with the before and after photos and the celebrity endorsements and this overall idea that they're a get rich quick scheme, but with your body. Just like financial investments, though, if it sounds too good to be true, it probably is.

Whether it's your body or your bank account, there is no quick fix to getting what you want. And so often, the solutions that matter for us in the long term are slow and steady and fairly unsexy. And one of the worst decisions you can make when it comes to your financial future is living with bad credit.

And if you are someone who is experiencing credit issues and wants to help fix it in a fast and painless way, check out creditrepair.com. Basically, creditrepair.com is your own personal mentor for repairing, building, and maintaining your credit. They help you build a customized strategy for improving your score, work directly with the credit bureaus to dispute any dings on your report, and teach you how to understand both your own score and the rating system.

If you feel like you're struggling to build or rebuild good credit and want someone to guide and advocate for you the whole way, check out creditrepair.com at the link in our description to learn more. As always, guys, thank you for watching. And don't forget to hit the Subscribe button and to come back every Tuesday and Thursday for new and awesome videos.

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