Welcome to this week’s edition of Investment 101. Having trouble choosing an investment strategy? With the economy just recovering, investing your money wisely is one of the most important things you can do. A penny saved is a penny earned and all that. But with all the temptation in this world, how do you decide what to do with your hard earned moolah? Well here are some things you can cross off your list:
The Top Seven Things You Should NOT Invest In
Yeah, I know, you like to spend money on the ladies. And I’m talking about jewellery, dinners, houses, cars, and clothes. There are reasons every male in the history of the world tries to impress a lady, but it always comes down to sex (doesn’t everything?). If you look like a good specimen, with good genes, who can take care of your family, you’re automatically more attractive as a mate. Everything you do in the search for a mate is an investment in biological reproduction, and unfortunately, unless you’re planning on selling off your kids, it’s not worth it financially. When’s the last time your lady doubled in value? Unless she has a rich uncle somewhere that dies and leaves her all his money, I’m guessing never. So you’re basically dumping all your hard earned scratch into a black hole. Well done you.
If you ARE planning on selling any babies that come out of your relationship, I hear they fetch a good price on the black market.
So you just bought the biggest, baddest computer in the history of the world. It runs Crysis at max graphics and is cooled by the tears of baby unicorns. You show it off to all your friends annnnd…it’s now obsolete. Computers have a life span of around 5 years before they really start to crap out, but give it a month or two and your monolith is going to be less technological wonder and more Rosetta stone. You can keep it going for a while with replacement parts, but in the end, your machine is going to that big ole’ scrap heap in the sky.
This one comes with a caveat: don’t invest in ORDINARY cars. If you’re able to buy a Bugatti Veyron and keep it in mint condition, you are exempt. If you find Little Bastard, you’re exempt (and probably dead). But if you buy a Honda Civic with the expectation that someone, somewhere in the future is going to want to shell out millions of dollars for it, you’re out of your mind. Cars can be beautiful machines, and if you keep them in good condition they can last you a long time – but the value will depreciate as soon as you drive them off the lot. So keep your eyes open for an extraordinary car, but know the chances of coming out of that investment on top are slim.
Another caveat: art is subjective, and you can usually find SOMEONE who is interested in your piece. Sometimes, however, it can take a hell of a long time. Investing in art is a waiting game, unless you’re sitting on a Pollock or a Picasso. Even then, you’d better hope it’s got some DNA on it or the artist signed it in blood, because the chance of it being a fraud is sky high. Even if it is real, it’s incredibly hard to convince the art community that you found a masterpiece in your attic. It does happen (see Who the #$&% Is Jackson Pollock? It’s a great movie.), but it’s like pulling teeth. If you AREN’T sitting on a Pollock, it’s even worse. You probably will find a buyer eventually, but they may not pay the price you wanted. Either way, not the smartest investment, even if it does work out.
Have you ever wanted to buy some land, hire some workers, and make your own olive oil? It’d be great for bragging rights, and absolute HELL on your bank account. There are reasons that not a lot of farmers get rich. When you’re making your living at the mercy of the earth, Mother Nature can be a bitch. Crops fail, pests set up shop, and droughts laugh at you. With persistence and luck (and maybe a goat sacrifice or two) you might be able to get your olive oil venture off the ground. But even then, Mother Nature laughs at you, because your olive oil might suck. The olives could be sub-par, and you’d be the laughingstock of the olive oil community! They’d say stuff like: “This olive oil has hints of barf, and smells vaguely like fish.” It’ll be really hurtful, and you’ll feel really bad.
Mind you, you COULD have some luck and your brand could work out, but it would be a long time before you started to see profit.
Ah, the cries of geeks everywhere. “But Memorabilia IS worth something!” Oh course it is – to other geeks. Even then, you have to know the approximate value of what you have, and an idea of what you think it’ll be worth in the future. There’s a world of difference between Action Comics #1 and all those Phantom Menace pop cans you saved. One is worth something, the other is just hoarding. Again, this is a case of the worth being subjective, but with a key difference. Some pieces of memorabilia will NEVER be worth anything. So if you make a series of horrible calls, you’re out…well, not a lot of money, but definitely some pride. I mean, seriously. It’s not like I collected all those pop cans, and still have some Star Wars Doritos bags hanging around somewhere.
So you’re ready to be the next billionaire, and figure the best way to do that is to buy a bunch of lottery tickets and watch the cash roll in. Maybe you’ll swim in it a la Scrooge McDuck.
Except you won’t, because you’re an idiot.
There’s a reason lottery prizes are so high, and it’s not because they love giving money away. It’s because of all the suckers who keep buying tickets, like you. Millions of people buy the tickets and only a few get any money out of it. The rest goes back into the pot. The chances of actually winning anything sizable are astronomical, but it doesn’t seem that way, does it? You figure that if you buy a bunch of lottery tickets, it increases your chances of seeing some money. That is called the Gambler’s Fallacy, and it likes to watch you fail. The idea is that buying more tickets changes the odds, when that’s completely false. Say the odds are 1 in 50 that you’ll win (as an example), if you buy 10 lottery tickets, you might think that your chances are now 1 in 5! But you’re an idiot. The chances are still 1 in 50 for each ticket, but you just bought more tickets, thus paying the lottery more than you have any right to.
So maybe you head over to the casino, because you KNOW you’ll get some money out of the slot machines there. You have a system. But…wait for it.
You’re an idiot.
You’re absolutely right, slot machines DO pay off, but it’s not out of the goodness of the casino’s heart. It’s called Intermittent Re-enforcement, which basically translates to: “pay out small amounts every so often, so that people keep playing”. It a brilliant system, really. You have something you want (money), and you know the chances of getting it are 1 in 50. So you play, and you play, and you play. Maybe the next one is a winner, maybe the next one is a winner…it never stops. Eventually, you get a small payout, and it validates you, so you keep looking for that big one. What you don’t see is how much money you’ve poured into the machine looking for that payout. Incidentally, they use the same principle in the video game World of Warcraft, but substituting rare drops for any real money.
Well there you have it. The worst investment ideas from yours truly. Now get out there and make yourself some money!