The Golden Rule

February 8, 2017

One of the challenges we face today is that we tend to become less patient.  Fast food, fast internet, instant messaging and pay-wave.  Gone are the days of purchasing with lay-by or saving first.  Instead, we have credit cards, buy now–pay later arrangements and payday lenders.  With spending, it’s easy to see how our impatience can quickly get us into trouble. What is often overlooked, however, is how impatience can get us into trouble with our investments as well.

One of the most important rules I have ever come across with investing is actually incredibly simple.   You’ve probably heard of it yourself:

“If it sounds too good to be true, it probably is.”

Unfortunately, many people lose sight of this incredibly simple principle.  They become impatient, and when an investment comes along that offers a “Guaranteed Return of 8% pa” people put their hard earned money into it with predictable but devastating results.    Other times, a trading company might generously offer to match your contribution to their trading account.   You invest $5,000 and they will match it with another $5,000. Sounds too good to be true, until you discover that the fine print requires you to perform $250,000 worth of trades before you can withdraw anything.

Unfortunately, there are no shortage of schemes out there eager to take your hard earned money off your hands.  You need a healthy dose of scepticism to avoid them and if something sounds too good to be true, don’t invest a cent until you understand how it works and what the risks really are. If in doubt, get independent advice from a professional first, because the cost of good advice is negligible compared to what a bad investment decision could cost you.