What happens when you get thrown into the deepest end of the pool?

.

Wednesday, March 2, 2011

[Update 5] Why is ‘Playing Safe’ the riskiest thing you can do with your money?

Here's what most people are like:
1. Risk adverse.       Or

2. They want to achieve something in investing...BUT it takes too much time and effort to learn, and with the job, life, family etc, they procrastinate to get financially educated.
I understand perfectly! Heck, I wanted to outsource my investments once too.
So they go for - Guaranteed Returns. I am sure you know the problem with organisations that offer that. The more guaranteed the returns are, usually means the lower the yield will be, yes?
(Anyone who disagrees with me, pls drop me an email. I am ALWAYS looking out for high-yielding, safe, guaranteed returns! ;D )
First let's understand what 'Guaranteed Returns' really means.
The bank/ insurance agency/ fund management firm/ company etc. that you have deposited your money with, effectively are 'borrowing' the money from you at the small returns they promised you, to put it to more speculative structures. Meaning: They are using your money to make HUGE gains and paying you a paltry sum. You are effectively taking the biggest risk (just that you are 'blind' to that) and getting the smallest returns. Does that sound fair to you?
Worse so are the principle guaranteed products. Principle guaranteed products means (to me. personal experience) the company can use that money and make all sorts of gains, at the end of the agreed time period, are bound to return you your principle sum. And usually they do so, with at most a very very very pathetic payout or just pay you back your principle. What's the point??
And in today's environment, where money can be printed faster than you can count them (devaluation of money ie. banana notes) and what this doesn't already rob away, inflation strips off. Guaranteed Returns products previously cannot cover inflation, currently geez...don't even talk about it!
By 'playing safe' and going for Guaranteed Returns plainly is the riskiest thing you can do with your money. In fact, let me put it this way, if your investments are not minimally returning you 8% nett pa, your money is still losing value.
So to protect and grow your money, in today's environment, you inevitably have to get financially educated (There are of course some shortcuts.) to 'open your eyes' to see what is truly worth investing in. You do so by evaluating risk, I will talk about this next time I post. 
Meanwhile, OPEN YOUR EYES and SEE what we have posted so far at 
Property Investors Club
Equities Investors Network
It is quite ridiculous to live an entire life being stuck under the thumb of money. Take care everyone!

Until next time.


Your Fellow Investor,

Martin Sim



Previous Updates

No comments:

Post a Comment

Labels