Last year on holidays, my son got stung by a jellyfish when swimming in the sea. The lifeguard put vinegar on it and it stung for a while but he was fine. For the rest of the holiday he was apprehensive about going into the sea again. I was telling him he was just unlucky but it wasn’t working. I was looking at it from my point of view. A grown man who has swam in the sea hundreds of time and never gotten stung. My son has only swam in the sea a small number of times (we’re not really beach people; the sand!!) and has managed to get stung. He is judging from a small sample size, so the chances of getting stung again are pretty big to him. Believe it or not, we look at investing the same way.
I have lost count of the amount of people who have had a bad experience with their investments. While there are plenty of bad investments out there, there are other factors that can taint someone’s opinion on investments, even if the
As an advisor, I also have to watch out for someone who has had too good an experience with investments. During the Celtic Tiger, when the country was obsessed with property, there were property syndicates being sold all over the place. There was lots of borrowing involved but due cheap lending these deals were closed quickly and with a buoyant economy, it didn’t take too long for an adequate level of profit to be made. Lots of people made a lot of money very quickly. Lots of these properties were not in good locations, there was a huge amount of borrowing, there is no access to your money if you want it and in a lot of cases, the communication and administration is poor. They are not good long term investments, it was riding on the tide of optimism and eventually a lot of people lost a lot of money.
When investing money, don’t let the experience of one bad, or good investment be the deciding factor on what investments are like. People have invested money for centuries and a lot of money is made from investing. Pension funds all invest in different assets, governments are constantly looking for investors to buy their debt. If they all had bad experiences, markets wouldn’t exist. Always look at the underlying assets that you are invested in and understand fully what the risks are with your investment.
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