|There is only one message here.
Investment is not about seeking high returns. Investment is
an exercise in risk management.
Do you want high returns?
Of course you do. And we can give them to you. Canadian mining shares?
Third World debt? Biotech stocks?
Of course these returns are not guaranteed. In fact
they are extremely high risk. You could lose your shirt. But on
the mathematical probabilities your 'expected gain' (whatever that
means) is likely to be higher than from more sober investments.
.....without any risk.......?
Oh, you don't want to take any risks? So you want a high return
with no risk.
And where do you think you are going to find that?
And why won't there be a million and one people in front of you
in the queue?
You just want to be able to
find good investments?
Well, there is no shortage of advice. You can try detailed financial
analysis, advanced screening, charting and astrology. May we recommend
"How to Become Rich Using Ten Simple Rules and No Effort"
- a visionary text by an admired tipster. Unfortunately:
- It's too late. The many thousand investment
professionals who form the market have already read this text
and acted accordingly. Well, they haven't bothered, actually,
but that's because.....
- It's junk. The very, very few people who
have the gifts to consistently achieve high investment returns
are running funds for themselves and/or their rich private backers,
and are keeping very quiet about it. They certainly are not giving
their secrets away for an auhor's reward.
Chasing high returns is a mug's game. It's fun, mind
you. But so is betting on horses.
Manage your risk. Returns will
High returns are not lying around to be picked up. They are the
reward for taking risk. And the investment game is to find that
blend of risks that suits you, that you can handle and that you
can live with.
Risk management is about taking chances. Specifically
it's about choosing which chances to take.
A good investor behaves like a professional card
player. In every move he balances risk against reward. He understands
what he is hoping to achieve. He is aware of what he can afford
to lose. In the jargon, he understands his appetite for risk.
A bad investor understands neither of these things.
He has no plan but just wants to "make money." Or he wants to be
absolutely safe, not understanding that without risk his financial
rewards are severely proscribed. Or he takes risks unnecessarily,
when a better strategy would allow him more reward with less risk.
Be a good investor.