Banjo Smyth

Does this sound familiar?  Isn’t it interesting that the common perception amongst the public is that investing is way too risky ?  What’s even more interesting is that if you asked any poor or middle class person how they thought the Rich made their money almost all of them would include ‘Investing’ in their answer.  So if poor people know that wealthy people are ‘Investors’ then why on earth do they believe that it is too risky for them to get involved?

The answer is simple

Humans are terrified of anything that they don’t know or understand.  In the immortal words of Garth from Wayne’s World “We fear change”.

So am I saying ‘Investing is not risky?’ Not at all, in fact if you don’t understand it or aren’t properly educated Investing is incredibly dangerous and risky.  But the same can be said about almost every daily activity that we undertake.  Whether it be swimming, crossing the road, riding a bike, driving a car or even eating a chicken wing – all of these activities would be highly dangerous if we hadn’t been taught or shown how to do them properly.  Luckily for us our parents took us to swimming lessons when we were children but unfortunately for us our parents never seemed to take us to Investment school.  Instead they taught us what their parents taught them about Money & Investing – and that was “to earn money you need to work hard”

Well I’ll tell you now that if you want to become financially successful and a master of wealth creation you will need to step out of your parents shadows and learn that ‘Rich people don’t work for money, they let their money work for them’.

I was first introduced to this concept in high school when I read ‘Rich Dad, Poor Dad’ but it wasn’t until a few years later that I truly understood the concept of having your money work for you. 

When I finished university I decided I wanted to travel the world for 6 months so I began working my backside off to try and finance the trip.  Whilst I was confident of my saving ability in the back of my mind I knew that I could always fall back on some money that my granddad had given me in the previous year.  As an early inheritance he had invested $7k (plus $3k of my own savings) into some shares that I knew very little about (other than the fact that if my ‘overseas trip fund’ was running low I had a backup plan).

To cut a long story short I managed to have the most amazing trip without eating into my Granddads shares.  But more importantly when I was overseas I met a fellow Australian traveler who was funding his trip by trading the stock market in internet cafes all over Europe (earning between $5-$15k per month).  Needless to say my interest in the Stock market suddenly grew and as soon as I got home I decided to see how my own shares were going.

Well to my great surprise the $10,000 that had originally been invested had now grown to $16,000.  So whist I had been climbing the Eiffel Tower and watching the Aurora Borealis in Norway my money had been hard at work.  What an amazing and life changing feeling!

 So how can you learn to make your money work for you?

Well as I found out this question is harder to answer that you might expect.  After learning about my shares success I couldn’t help myself from telling everyone I knew but for some strange reason no one seemed to share my enthusiasm.  All everyone could say was “be careful, the stock market is very risky’ or they would tell me stories about how their ‘nephews, cousins, friend had once lost all their money on the stock exchange’.  At this stage my head was starting to hurt and I didn’t know who or what to believe.  Just recently I found a great quote by Kurek Ashley that summed up the position that I was in perfectly:

“The most expensive advice you will ever get, is free from poor people”

If you look at what this quote really means you will be able to understand why the average person believes that investing is too risky.  It is simply because your typical ‘poor to middle class’ person is receiving their advice from a fellow ‘poor to middle class’ person.  Surely this is a case of the blind leading the blind, or at best the blind leading the severely visually impaired. 

If your child wanted to be a professional gymnast and you knew nothing about gymnastics what would you do?  Obviously you would find the best Coach/School and you would let them teach your child.  Well the same principle applies if you want to be financially successful.  You need to find Mentors, books, DVD’s, Seminars anything or anyone that knows more about Wealth Creation than you do and gradually build up your knowledge.  Then eventually like a professional surfer glides over the waves you can successfully let your money work for you rather than drowning in an ocean of uncertainty and risk.  As Warren Buffet once said “Risk is not knowing what you’re doing”

So you are now faced with a few options

1. Not invest and spend the rest of your life ‘working for money’
2. Invest your hard earned money before you are educated enough, loose  your life savings and in turn become one of those people who tell everyone else that “Don’t invest, it’s too risky, the stock market stole everything I had”
3. Or you can dedicate yourself to learning about Investment strategies and techniques and gradually build up your confidence until  you become a successful Investor and let your money work for you.

So are there risks with Investing? YES of course there are, but like swimming, crossing the road, riding a bike and driving a car once you educate yourself you lower these risks and in turn get to enjoy the wonderful benefits.

Surely NOT investing is the biggest Risk of all.

This entry was posted on Tuesday, June 10th, 2008 at 9:31 pm and is filed under Investment Education. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.