While channel surfing after a long, unrewarding work day, it's getting easier than ever to get sucked into infomercials on how to trade currencies, start an eBay business or invest in gold. Making millions overnight has always been a tempting proposition, but even more so these days as you're feeling the pinch of the economic times. (Owning property isn't always easy, but there are plenty of perks. Find out how to buy in. Read Simple Ways To Invest In Real Estate.)

IN PICTURES: 4 Biggest Investor Errors

From homes to stocks to retirement plans, Americans have less money in the aftermath of the Great Recession. Household net worth - the value of all American household assets - in the first quarter of 2010 was $54.6 trillion, approximately 17% below the pre-recession high of $65.9 trillion, according to data released by the Federal Reserve.

An uncertain economy - high unemployment, an unstable housing market and looming tax increases - means more of our wealth is in jeopardy. It is a time that financial experts say requires preserving capital rather than generating high-growth returns.

To avoid taking a few risky wrong turns and ending up bankrupt, be wary of the following investing tips (one or more that you've probably seen on late-night television).

Your money is safe in company stock options.

Back in the early 2000s, employees lost jobs, company stocks plummeted and pensions were depleted in the wake of the fraud scandals of major public U.S. companies such as Enron and WorldCom. This dispelled the notion that major corporations can't fail and showed how disastrous investing your entire savings into one entity can be to your financial security.

Roger Wohlner, a Chicago-based certified financial planner, suggests divesting company stock over a number of years to other investments (or give to charity as a tax write-off if your stock has appreciated). He advises not having more than 10% of your savings in one stock or company.

You can make a fortune by trading currencies, investing in gold and flipping homes.

Despite the boom years, where individuals prospered day trading and turning real estate, Wohlner adds that following the latest investment trends is difficult for the average person to emulate. Unless you are a day trader or an investment guru, steer clear of investments outside your line of work.

"It only takes a couple of wrong turns and then poof, it's gone," he says.

Your cousin Johnny is starting a genius new business and you have to get in on it.

Joel Ohman, a certified financial planner out of Tampa, Fla., who also heads the site creditcardchaser.com, says another tricky situation is loaning out money to family and friends who are starting new businesses. Unfortunately, the strength of a relationship doesn't guarantee the success of a new venture. If you want to show your support, but not empty out your retirement fund, Ohman suggests contributing a very small amount of money.

Real estate investments always appreciate, so buy the biggest home you can afford.

In the housing meltdown, the consumer mentality that home values were unfailingly headed upward was debunked. According to Michael Bluejay's guide on "How to Buy a House," you can afford to buy a house that is three times your household's annual income as long as you have the money for a 20% down payment and have little to no debt. Buyers who don't meet those requirements are subject to high monthly payments, higher interest rates and a greater risk of losing their home.

My buddy runs a hedge fund that can make a 12% return on your money.

Don't tell me you've forgotten about Bernie Madoff, who defrauded his investors of billions of dollars. When it comes to hedge funds, which are mostly unregulated investments that try to maximize returns, and other riskier investments, Ohman says to work with someone you trust and limit your involvement.

IN PICTURES: 10 Tips For Choosing An Online Broker

Throw your money in the stock market until you need it next year.

Another rule of thumb is that investing for the long term outperforms the short term and minimizes the impact of volatile market swings. The S&P 500, a stock index of the largest U.S. companies, averaged a yearly gain of 9.8% from 1926 to 2010, reports CNNMoney.com. And investing for the short term means you are susceptible to devastating one-day drops, like in October 1987 when the market dipped 22.6% in one day.

The Bottom Line

Plenty of people have grown rich through stock options, venture capital, hedge funds and the stock market. It's not necessarily the strategies that will leave you broke, but the amount of money that you negligently invest in these riskier, high-growth avenues. You don't want to overweigh your savings plan in any area, and overall your portfolio should only include 10% or less of high-risk assets, says Ohman. The other 90% should be secured in bonds, mutual funds and cash. (For more on this topic, see Risk and Diversification: Diversifying Your Portfolio.)

Related Articles
  1. Investing Basics

    Explaining Unrealized Gain

    An unrealized gain occurs when the current price of a security exceeds the price an investor paid for the security.
  2. Investing Basics

    Explaining Risk-Adjusted Return

    Risk-adjusted return is a measurement of risk for an investment or portfolio.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Agency Bond

    Find out about the iShares Agency Bond exchange-traded fund, and explore detailed analysis of the ETF that tracks U.S. government agency securities.
  4. Investing Basics

    5 Things to "Deliberately" Do to Improve Your Trading

    Most traders are putting in trading hours, but not improving. Here are deliberate steps that can take your trading to the next level.
  5. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Low Volatility

    Find out about the PowerShares S&P 500 Low Volatility ETF, and learn detailed information about this fund that provides exposure to low-volatility stocks.
  6. Chart Advisor

    Stocks to Short...When the Dust Settles

    Four short trades to consider, but not quite yet. Let the dust settle and wait for a pullback to resistance for a higher probability trade.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Intermediate-Term Bond

    Find out about the Vanguard Intermediate-Term Bond ETF, and delve into detailed analysis of this fund that invests in investment-grade intermediate-term bonds.
  8. Stock Analysis

    Benefits of Regional Bank ETFs over Commercial Banks

    The SPDR S&P Regional Banking ETF offers a stable local alternative to broad-based multinational commercial banking sector funds.
  9. Active Trading Fundamentals

    Arbitrage Pricing Theory: It's Not Just Fancy Math

    What are the main ideas behind arbitrage pricing theory? We provide a simple explanation of the model and how to use it.
  10. Investing Basics

    Explaining the High-Water Mark

    A high-water mark ensures fund managers are not paid performance fees when they perform poorly.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth ...
  3. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  4. Systematic Manager

    A manager who adjusts a portfolio’s long and short-term positions ...
  5. Unconstrained Investing

    An investment style that does not require a fund or portfolio ...
  6. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
RELATED FAQS
  1. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Full Answer >>
  2. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  3. How do I place an order to buy or sell shares?

    It is easy to get started buying and selling stocks, especially with the advancements in online trading since the turn of ... Read Full Answer >>
  4. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  5. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  6. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!