The 7 Deadly Sins
Warren Buffet is widely recognized as the most successful investor of our times. One of his habits is maintaining a file on his desk labelled ‘too hard’. These are complicated business models that he can’t easily understand. He prefers to invest in food, insurance, and batteries, but seldom in technology. In your financial life you will be presented with many temptations that seem too hard. Here are a few things to be wary of. I call them the 7 deadly sins.
1-The proposal is extremely positive with little downside. Positivity is a great attribute in life but not when it comes to investing. Take the opposite approach and be negative. Look for what could go wrong.
2-It takes a long time to present. I use the 5-minute rule, then I become suspicious that something may not be right. If you are not ‘getting it’ right from the start that should be a red flag.
3-The wording seems complicated and long. There are many financial industry buzzwords that sound impressive. Beware. I like to have something explained to me like I’m 6 years old.
4-Not enough time provided for questions. People are usually too afraid to ask. Don’t be one of them. Ask every dumb question you can think of.
5-It’s brand new. Don’t fall for ‘everybody is doing it, you’ll be left behind’. It is very likely that if the opportunity is viable, it will get better with time, not worse.
6-There is a tight deadline. Don’t be pressured by these. If today is the last day it’s available, just say no.
7-And my favourite – the hot tip. It’s the Sunday afternoon BBQ, and your brother-in-law is extolling the virtues of that ‘can’t miss opportunity’ he just got into. Run for the hills.