Don’t handle your life’s savings to a stranger
By Simon Chobod
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Why do we see so much volatility in the financial markets? Why the Real Estate is going through the roof?
Why the Google stock tripled in price short time after being issued?
What are the chances that other hi-tech stocks will follow suit?
Or will they be wiped out in the next wave of panic selling?
The answer is simple – there are too many nervous investors with too much money on their hands,
and they don’t know how to keep its value. You can’t just put money in a bank.
Not any more. The interest rates are way behind the prices increases.
You watch helplessly how your deposits in the bank are diminishing their buying power every year.
By the time you will need the money for retirement, there will be very little left.
What can you do? There are plenty of financial advisors. Some of them tell you to buy gold,
since it tripled in price during the financial crisis 30 years ago.
To make investment decisions based on past performances, is similar to driving a car,
while watching only the rear mirror. The gold fell in price by two thirds 20 years ago.
No one can guarantee you that the gold prices will rise again. That it will be a safe haven for investors.
There are other advisors that tell you the stock market is the way of the future.
They tell you about Warren Buffet, who made billions in the stock market.
What they neglect to tell you, is that the stock market prices over the years were mostly in line with the inflation.
That means other investors lost their money to enable Warren Buffet to make his billions.
It is the same as in a casino – for every big winner many small players lost their shirts.
Those advisors claim that they can teach you the stock market secrets.
When you buy their books, they are full of hot air.
There is only generic advise there – work hard, study the companies performance.
If it was that simple, don’t you think the experts would be buying the stocks themselves?
The truth is that Warren Buffet was buying the whole companies and thus was able to influence the prices of their stock.
You can’t compete with Warren Buffet in the stock market any more than you can compete with John McEnroe
on a tennis court by buying a tennis racket.
There are plenty of financial advisors, but every one of them is trying to sell you something.
There is an old story about a lover, who got surprised in the act by the returning husband
and took a refuge in the cupboard. Suddenly there is a fire in the house.
The wife is running around the bedroom shouting: “What are we to do?”
The lover is whispering to her from the cupboard: “Furniture, first you should get out the furniture.”
The first rule of understanding investments is to ask: “What are they trying to sell me?
What is the size of their commission? After everyone else gets paid, will there anything be left for me on that table?”
The second golden rule of prudent investment is never invest into commodities, about which you know very little.
Unless of course you like to gamble with your money, and that is a totally different strategy.
In general, if you invest in things and you have no control whatsoever over their future prices, it is gambling more than investing.
Example – if you are knowledgeable in the genetic engineering, and you buy stocks in the companies
that you think have good products for the future, that is investing.
Your money are still at risk, but at least you have a chance to win.
If on the other side you buy stocks in a high-tech company just because you read a good article about them in a newspaper,
this is gambling pure and simple.
What about investing in the Real Estate?
If you buy a good sturdy house in your neighborhood, which you know you can always rent, this is a good investment.
But if you buy an apartment complex in Arizona, in a community, which you never have seen in your life, this is gambling.
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