You are not exempt from the law of gravity. You and I also aren’t exempt from that little part of our brain that gets greedy and wants it all today. That comes to spending as much as investment returns.
On the spending part, we think that it’s not really that much per month or in total, and we get wildly and wrongly optimistic that we’ll pay it off sooner than reality or our income will ever allow. Besides, we think we make maybe $50,000 and we deserve it. Well, we don’t make $50,000 by the time taxes come off and all the bills we already have. But that little part of our brain conveniently forgets about that.
We can get just as stupid about investment returns when that part of our brain forgets about common sense. Savings accounts are around 1% right now, and the stock market has a historical return of 8% to 10%. So when someone tells us we can get a risk-free 18% to 22% return we have two choices: We can laugh and tell the guy to get lost because it’s always a scam, or has a big catch. But often we don’t. That little greedy part of our brain says: Well, that’s a great idea – and never mind the fine print, that we’ve never heard of the firm, and that it’s way too good to be true.
And thus, another scam or Ponzi scheme succeeds. The latest one unraveled in Alberta for over $52 million. Surprise! The police can’t find the people involved and the accounting firm can’t find any of the money. This one even conned a really successful Western Canadian businessman for $6 million.
If it’s 20 times what the bank pays, and double or triple the best market returns, it’s a scam. Stop and listen to the part of your brain that has the common sense gene and know only slow and steady wins the investment race.
All that glitters is not gold anymore. The hype of gold seems to be cooled off – or turned cold. That can’t miss investment and the only safe place from inflation was another fad like so many others. Sure, those still invested and everyone who has a stake in selling you gold tells you it’s just temporary. If you look through our stories, I’ve warned you away from golf three or four times. Now it’s down to the $1,300 area code from a high of $1,900 or so.
That wasn’t much of a hard prediction. Gold is massively volatile and subject to extreme downturns. A 30-second internet search past all the hype would have told anyone that. Tons of people have lost a fortune. That’s sad, but totally unnecessary. Slow and steady investing always wins the investment race. Those people got greedy and I guarantee they’ll get greedy again on the next sure thing in the hope of making it all back in one shot. They should have gone to Vegas, instead.