Yes”.
It is funny how stupid people are at making big financial decisions when they go nuts over small ones. There is a British saying I always love, “penny wise, pound foolish.” I took it to mean, “making decisions with small amounts of money (pennies) that end up making bad sense affecting larger amounts of money." And pounds referred to Great British Pounds.
I’ve seen clients applying their life savings on “a good product their friends/family/investment managers told them to invest in”. Do you know how many people have lost hundreds of thousands of dollars on bonds of ONE particular bank?
Here’s the bottom line:
- The stock market goes up over time. It's a nice way to put your money and forget about it for a big while. You gotta know the companies you’re investing in, or at least buy ETFs that track a few tens of companies instead.
- People don’t follow what I wrote above. Instead, when they hear of a certain stock, or someone calls them up and tell them to invest in a specific stock, saying because that the stock pays good dividends and has been growing well in the past years. People deploy their lifetime savings just like that, after all, it's their friend or investment manager recommends to, and he should know because it is going up and up!
People should stick to stocks of businesses they believe in, and they believe will be around during their lifetime. They should not always speculate on the value of a stock/market.
Sadly, it's just actually the opposite going on.
In my next article, I will write about how to avoid the above and the things to note that we can do if we are to speculate stocks, hopefully maximising our chances of winning.
