Quick money can destroy someone’s life

There are many rumours in the market about how you can money fast. Some traders even develop some sort of formula for people to follow — e.g., quick ways to predict the index tomorrow or maximize returns with the least investment. People crowd into the market following schemes like these, trading options and warrants in the hopes of easy riches. Unfortunately, most of the time these people lose the most when the market slumps.

Quick money can seem particularly attractive to people with strong self-confidence. They believe they have superior abilties to predict the market based on probability, or even to manipulate the probability that a given event will happen. They think they can beat 99% of the market players and be the only winner in the financial market. They’re wrong.

It’s human nature to want to get rich and wealthy. But I believe that the journey to achieve that goal is much more important. History is full of examples of people who win a trillion-dollar lottery and end up going bankrupt. To amass and keep real wealth, you need to know how to manage it – a skill that people who get rich fast often haven’t learned.

Hence, I think investing defensively – seeking investments that will help you not lose money more than they help you gain it – is the universal truth when it comes to investing. Famous fund manager David Swensen once said, “The secret of real estate is location, location, location; the real secret to a fund’s remarkable continuing success is defense, defense, defense.” If you manage to make fast money but cannot preserve it, you’re likely to see those quickly won riches evaporate in the end.


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Disclosure: Johnny Chan does not own shares of any companies mentioned. Motley Fool Hong Kong is not licensed by the Hong Kong Securities and Futures Commission to carry out any regulated activities under the Securities and Futures Ordinance.