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Be Wary of 'The Next Big Thing' When Investing Featured

While the market displays a volatility unseen in recent months, investors might be tempted to search for “The Next Big Thing.” 

Not so fast, warns the Arizona State Corporation Commission.  Pointing to three products recently in the news, marijuana-related investments, binary options and digital currency, the Commission cautions in a press release, "Before investing, investors should understand what these products are, their benefits and their risks.”

It would appear at first glance that these products are not related to one another at all. Yet, they have all recently emerged as potential investments which could become “the next big thing.”

Marijuana

In a CNBC article, How to Legally Invest in Pot Companies, author Michelle Castillo writes, "It's important to note that the business is still illegal. Ryan Hurley, partner of Rose Law Group in Scottsdale, Arizona, admitted during a panel at the 2015 Cannabis World Congress & Business Exposition in New York on Thursday that when clients ask him to protect them from going to jail, he can't 100 percent guarantee it. While the federal government has recently turned a blind eye to companies who follow state regulations, Hurley said the policies could change after the 2016 election.

"As with any new investment opportunity, the questions and conundrums are enough to make your head spin – and that’s without inhaling,” writes Lou Carlozo in the  Money section of US News

The Motley Fool offers 10 things you need to know before buying marijuana stock

Binary Options

In an article dated July 27, 2010, Forbes ran an article flatly titled, Don’t Gamble on Binary Options. "The sites appeal to the same type of people who play poker online. But they somehow have an aura of being more respectable because they represent themselves as offering a form of investing. Don’t kid yourself. These are gambling sites, pure and simple. It’s probably just a matter of time before regulators move in on them.”

That perspective hasn’t changed much in the last six years. “ A binary option contract is based on the investor’s prediction of an underlying security’s value at a predetermined date. There are only two possible outcomes: the investor may receive a fixed amount of money for guessing correctly, or lose the entire investment for guessing incorrectly. Binary options are simplified options contracts that look more like online gambling than a traditional security or investment,” explains the Corporation Commission. 

Digital Currency

Are you in the dark about Digital Currency? This article from the Wall Street Journal, Bitcoin and the Digital-Currency Revolution, will help explain how it works. But US News writes, “This digital currency may take daring investors on a wild ride...

"So is now a good time to buy bitcoins? Or is it ever a good time to invest in them? Financial experts from all corners of the traditional investment field answer with a resounding “no,” while digital entrepreneurs and their ilk say “yes,” often to the point of bullishness. Throughout 2014, the Securities and Exchange Commission kept a close watch on bitcoin activity. In May, it issued a warning that "the rise of bitcoin and other virtual and digital currencies creates new concerns for investors. A new product, technology, or innovation – such as bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities.”

The article continues, "If they’re stolen via computer hack, good luck, says Kim Caughey Forrest, vice president and senior analyst of portfolio management at Fort Pitt Capital Group in Pittsburgh. “There are rules about what happens if someone breaks into the bank and steals and how the account owners are compensated. That is missing from the bitcoin world.”   

"She also notes, “We would never tell a client to buy bitcoins as an investment. How can I ever tell if a bitcoin is over, under or fairly valued? I can’t. Neither can anyone else. This is what makes an investment. Otherwise, it’s a lottery ticket."

"That said, you may be able to buy lottery tickets with bitcoins in the future..."

All in all, a good rule to remember is that you shouldn’t invest money that you can’t afford to lose. As the Corporation Commission’s notice concludes, 

 “The bottom line is that before making any decisions with your investment dollars, ask questions, make sure you understand and can afford to take the financial risk, then most importantly, check with the Commission’s Securities Division before you invest,” Acting Chairman Doug Little said. 

"The Commission’s Securities Division has an investigator on duty who can be contacted by telephone at 602-542-4242 or toll free in Arizona, 1-866-VERIFY-9 (837-4399) or by email, This email address is being protected from spambots. You need JavaScript enabled to view it.. The detailed advisory can be found in the Investor Alert section of the Securities Division’s investor education website, www.azinvestor.gov."

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Last modified on Saturday, 23 January 2016 11:45
Lynne LaMaster

Lynne LaMaster is the Founder and Editor of the eNewsAZ Network of websites. She asks a lot of questions! In her spare time, she loves photography, cooking and hanging out with her family.

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