August 05, 2017

Invest In What You Know

One interesting characteristic of humans is the tendency to complicate simple things. One place this often plays out is in the area of investing. There is a perception that investing is difficult, so to play to that script, we make it complicated. Your objective is very simple – get a return on money invested over time. The foundation is the simple interest – whether you are investing in the money market, you are expecting a certain return after a certain period of time. It could be your money or other people’s money. The objective is pretty straightforward- to make profit. If you don’t understand what you are about to invest in, don’t invest. It is as simple as that. I saw a quote somewhere that 'if the investment cannot be explained in one simple sentence, simply walks away'.  

Many schemes come and go. The one hat attracted a lot of interest recently due o press coverage and social media was the MMM. What fascinated me about the MMM was the fact that a lot of subscribers knew they were signing up to a ponzi schemes but they went ahead all the same. Some resorted to insulting people trying to offer them advice. They knew that ponzi schemes make money by collecting money from new investors to pay old investors. It is a game of musical chairs that is not sustainable, because such schemes eventually run out of the pool of subscribers, living the pyramid to crash to the bottom.
Many of such ponzi schemes are still floating around with fancy names, claiming to solve societal problems. Some decorate their pyramid with skill acquisition training for empowerment. After the training, you can join in building the pyramid that is doomed to collapse because it is running a model that is not sustainable. You are helping the poor by collecting money from them and asking them to go and bring others so that you can also collect from them, sometimes in dollars.
Why will someone go into an investment knowing it going fail? This is subject for the whole book. I think greed and desperation are the primary drivers. They know the building is on fire. They were hoping they could get what they wanted before the whole structure came crashing down. We all know we should not enter a burning building. Does the fact that we saw some people go in and come out safely make it okay for us to go in? We reckon our luck can hold so that we too can come out safely, ‘let me collect my own before the thing collapses’.
Telling someone something is wrong when they already know it is wrong is often a waste of your time. Money and investing is driven my emotions, not logic. If it is that driven our money decisions, we wouldn’t see fire and put our hands into it. We would spend less than we earn, save and invest, fix our expenses and grow our saving and investment, stop spending our income on liabilities, rather preserve it as capital and consume our profit (delayed gratification) etc. We all know the right thing to do at some level. Getting to the point where you actually do it on a sustainable basis is where the rubber hits the road.
The gap between the rich and the poor will keep getting wider because the rich will do more of what is making them rich while the poor will keep doing more of what is making them poor. So the rich become richer while the poor becomes poorer. The poor becomes rich when they start to think like rich people and taking actions that will make them richer. Investigate before you invest    
Aside from those who see fire and still go ahead to put their hands inside, there are those who don’t really know. These are folks asking questions if an investment is safe. That is a good question to ask. Investigate before you invest. Investing is not a mysterious or difficult as it sounds. It could be as doing a search on the internet on your phone. Imagine you want to invest on XYZ scheme that gives a return higher than the money market. You can simply go to Google and type in ‘is XYZ investment a scam?’ or ‘xyz INVESTMENT SCAM’. The result will tell the story. Go through it to find out if it is the experience of actual consumers, or someone asking in a forum. There is no point repeating the mistakes of others.                                                    

It never cease to amaze me why I go around in circles for days trying to solve a problem which I can easily ‘GOOGLE IT’. When I used to customize codes (web template design), I would battle it out for days trying to make it do what I want. After I was worn out and frustrated, I would search for the solution only to find that thousands had the same problem before me, and posted in a forum somewhere it was answered. Often, the solution was so simple that I would feel like kicking myself. Why did I waste so many hours trying to figure it out all by myself?
This is my advice for everybody, always do research before you invest in any program, stop wasting you capital, stay focus and master one business before you jump into another one, google is always there to help you, be determine and work hard in a smart way and stop jumping from one business to another.

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