Finding a good side hustle can be your key to financial freedom.

When searching for a side hustle, it’s important to keep in mind that not all side hustles are created equal. Some can potentially offer great returns while others are horrible wastes of time, effort and money.

Below is my list of worst side hustles in terms of return on your money, time and effort:

Day Trading/Forex:

Day trading is the purchase and sale of the same stock by an investor on the same day. 

Forex is short for foreign exchange and represents the global market for currency exchange.

These activities are at the very least suspect from an ethical perspective since you’re risking your money in an activity that carries no prospects of creating any usefulness for society. 

In this respect, it’s very hard to distinguish Day Trading/Forex from gambling.

If all day traders/forex traders ceased Trading today, very little value, if any, would be lost from society.

These activities also carry horrible financial success rates.

A famous study entitled “trading is hazardous to your wealth” estimates that active traders underperform the market by an average of 6.5% annually and that the more active they are the worse their performance. [1]

Another study finds that less than 1% of active traders are able to predictably earn a profit. [2]

You may argue: “well I’ve actually been making good money day trading”. 

There’s an old adage on Wall Street that says: 

Don’t confuse brains with a bull market.

In 2019, the S&P 500 was up 30.43%.

So if you made less than a 30.43% return in 2019 you actually got outperformed by someone who just owned the market in 2019 and made 0 trades after that.

In other words, whatever effort and stress you experienced getting into and out of positions actually lowered your returns.

Rule of Thumb Alert

If you’re financially better off digging holes and filling them back up again then it’s a bad side hustle.

The next time you have the inclination to day trade, go outside and dig a hole and then fill it back up again. It’s less stressful, you’ll get some exercise, and most importantly you won’t be losing your money.

Multi-level Marketing

These are companies that recruit you “to sell their product” but the main way anyone is making any money is through recruiting other people to “sell their product”.

Rule of Thumb Alert

If the primary way to make money is through recruiting other people who recruit other people rather than actually selling the product to the end customer then you’re dealing with a pyramid scheme and you should run for your life.

Remember, from the perspective of the company that is selling you dreams of becoming rich through enrolling in their program or buying their product so you can sell it to other sellers, you are the end customer.

Rule of Thumb Alert

Unless you are personally a fan of their product and you use it, you shouldn’t be selling it to anyone else much less recruiting anyone else to help sell it to others.

So before you go embarrassing yourself in front of your Facebook friends who you haven’t spoken with since high school with openers like: “Do you have an open mind?” or “Do you know the keys to success,” take a step back and ask yourself: Would I use this product that I am asking others to help me sell?

Not all Multi-Level Marketing is a scam, but remember the rules of thumb I mentioned and approach any MLM “opportunity” as a scam unless proven otherwise.

Also, if they mention anything about you eventually being able to buy a boat, make like a tree and leave!

Cryptocurrency scams

In 2018, losses from cryptocurrency-related scams amounted to $1.7 billion U.S. dollars.[3]

These scams typically take one of the following forms:

They’re either pyramid schemes where the investor is asked to put up some money for a period of time and is promised returns of x% every day.

Investors are then encouraged to recruit more investors by being promised a fee for every dollar they’re able to bring.

New money is used to pay off old investors and so on until the new money can’t keep up with the distributions owed to investors and the whole thing falls apart. 

Rule of thumb alert

Anyone promising you returns of a certain percentage on an investment is probably a scammer. In real life, returns are a function of how an investment performs which is unknowable ahead of time.

The other way cryptocurrency scams work is through fraudulent ICOs (Initial Coin Offerings).

In exchange for sending active cryptocurrencies like bitcoin and Ethereum, customers are promised a discount on the new cryptocoins.

Many of these Initial Coin Offerings turned out to be straight scams where there was no new cryptocurrency to begin with. 

Rule of thumb alert

If you don’t fully understand the intricacies of a business, don’t invest.

This is not an exhaustive list of crappy side hustles.

Take note of the rules of thumb I mentioned.

Remember if you want to become wealthy, don’t chase money; rather, think about how you can make yourself useful to others and inshAllah you will achieve both usefulness for others and wealth for yourself.

Sources

  1. https://www.tradeciety.com/24-statistics-why-most-traders-lose-money/
  2. https://www.tradeciety.com/24-statistics-why-most-traders-lose-money/
  3. https://www.reuters.com/article/us-crypto-currency-crime/cryptocurrency-thefts-scams-hit-1-7-billion-in-2018-report-idUSKCN1PN1SQ