The Seven Deadly Investment Sins – by Jon Bennion-Pedley
During this period of endless, temporary, irritating, enjoyable, frustrating, life-affirming incarceration (lock-down) I have far too much time on my hands. Which is both brilliant and horrible!
I was a horrible student but I now have a lust for learning which means I am eternally grateful to God for Google. This week I Googled “The seven deadly sins”. “Gluttony” – really?! They couldn´t think of anything worse than an extra helping of pudding? And then my over-active mind started thinking about how many of these “sins” are applicable to investment……..more than half. And so here, for the record, are my seven deadly investment sins – ways to guarantee a descent into financial hell!
GREED – a fairly obvious starter. If the investment promises an unbelievable, inexplicable profit and you still want to go ahead then your greed has overtaken your mind and you deserve your losses. Your brain is a better judge of viability than your heart.
PRIDE – too many of us (particularly the male of the species) hate to admit a mistake or that we don´t understand an investment. That keeps us chasing losses in failing schemes or allows us to be bamboozled by conmen. Be humble!
FEAR – some of us allow our lives to be dictated by shapeless and unquantifiable fears. We keep doing what we have always done and keep getting what we have always got. Low returns with capital guarantees. The reason that a recent government gilt issue in UK was oversubscribed by 150% wasn´t the 0.65% per annum it is paying! “We have nothing to fear but fear itself”. Be strong and courageous. And wise!
SLOTH – Most investors work very hard for their money – and then are very lazy about their investments. They just give the money to the bank or they trust some smooth-talker with no office. Madness! Research exhaustively, visit projects and offices, always meet earlier investors.
ENVY – The reason that pyramid schemes and Ponzis work is envy. When you hear that the halfwit you knew in school who could barely spell is making 30% profit EVERY month from a brilliant new Crypto scheme (scam) it isn´t just greed that sends you to their offices with your life savings. Stop it! Be pleased for your halfwit friend – he will be able to afford to complete P7 now.
PREJUDICE – All of us have deep-seated prejudices and biases. Work hard not to apply them above intellect when you look at an investment. I generally hate mining investments and I have avoided lots of scams because of it – but I have also lost money by not properly researching some investments that have paid investors very well for a very long time. Be open-minded!
ARROGANCE – just because you have built a successful business, made some great investments, and have always made money in a certain area doesn´t mean that you are perfect! Pride comes before a fall. And things change – previously good companies go bad, successful sectors or technologies get replaced, and sometimes our good judgement isn´t in working order. I am 51 years old but I recognise that “Every day is a school day!”
I produce this list from both sweet and bitter experience! I hope it helps to make you profit and save you losses.
Written by Jon Bennion-Pedley