As you are working on your path to financial freedom and investing money in stocks, bonds, and real estate, you might wonder what successful people do with their investments and what you should avoid doing by learning from their mistakes. Today we will cover some of those things that successful investors do not do with their money.

Learning from those who have already made a fortune is one of the best ways to build up your investing skills. Let's take a look at some of the investments that millionaires try to avoid because truly wealthy people know that there are better ways to invest their money. Some of those things are hard to recognize and they usually end up costing you money in the long run or they do not make a good enough return to be worth putting your money into.

Bonds

A lot of millionaires invest in bonds to primarily keep up with inflation rather than to increase their fortune. If you have got enough money where you can put your money in 3% bonds and never have to worry about money then you are probably fine with investing in bonds but for the rest of us we are still on our path to financial freedom. Rich people who invest in bonds are not interested in investing, they are not really interested in compounding money and a high rate of return over time, they are simply interested in preserving their capital.

Many beginner investors are attracted to bonds due to their low risk which is absolutely right assuming you want to just keep up with inflation at best. At the same time bonds will not be as volatile as other ways to invest. You are not going to lose money when you invest in bonds but you are not going to make money either. Average government bonds have an annual yield of about 3 to 5%. Unfortunately 3% is about the inflation rate so while this is more than you would get out of a savings account it is far less than the returns you will be able to achieve by investing in the stock market.

Gold

Wealthy people do not usually invest in gold, despite the common interest in gold and other precious metals as kind of a safeguard against economic downturns. It is true that gold tends to have an inverse relationship with the stock market meaning that when the stock market goes down then gold prices tend to go up and vice versa. In reality, gold prices do not typically go up enough to make gold a good investment even during periods of economic downturn.

Physical gold is not liquid enough for a safe investment. Putting your money in something that you cannot immediately turn into cash is a risk especially when things get tough. That is exactly why you are not going to see many millionaires investing in gold.

The last reason to not invest in gold is it does not earn anything, it is not an asset that produces cash flow and most investments that are good ones produce cash flow.

CD

We already touched on this item in the past but it is a good reminder that investing into CDs or certificates of deposit is not something that rich people do. CDs are somewhat similar to bonds but they offer even lower returns. The money that is invested in a CD while it is safe from a loss is also money that is not growing at any significant rate. CDs are not going to get you to a wealthy retirement any faster and millionaires know that. If you are trying to build your wealth generationally portfolio you are not going to put a lot of money in CDs.

Hype

The next thing that you do not really want to throw your money into is hype. Hype is a really scary fun thing that appears every now and then. New investing trends take the market by storm and a good example is cryptocurrencies. Even though crypto is not all bad and there is a lot of potential there, all that is fueled largely by a lot of hype and the hype drives up the price of these alternative investments far higher than it should be. Most of those hyped currencies do not have an inherent value, they do not produce any cash flow and their future performance is basically determined by people wanting to pay more. Volatility of cryptocurrencies is really high which makes them hard to predict and a really poor option for a long term investment. Putting your money into hype and investing for years is not even saving it is just gambling with your money which is not something you want to do .

Where To Put Your Money

If you want to be a millionaire in the future you should follow advice from those millionaires. The vast majority of them will give you the same advice which is you need to put money in the stock market if you want to be rich. There are multiple ways to invest in the stock market and I suggest you start by reading this post on the topic. The best potential for high returns you will get by investing in individual business but it also requires a lot of careful research and analysis. If you want to take an easier route to investment then investing in mutual funds is your best option which will give you the average market returns which is a great start.