Thursday, November 13, 2014

"The lady doth protest too much, methinks"

After coming across this article about investors losing $1 billion+ by investing money through "secureinvestments.com", I was reminded of this quote: 
"The lady doth protest too much, methinks" -  Hamlet by William Shakespeare
The key takeaway from this quote is that the more loudly we hear an assertion, the more likely it is not so genuine. More concisely, the loudest person in the room usually has the least to say. When a business names itself "Secure Investments," one should be especially wary of how secure it is.

Now, this is very unfortunate for those affected and I do hope they are able to get some of their money back. However, it is worth noting some rules of thumb which can help investors avoid landmines such as the above:

1) Education about investments is the best protection one can pay for. Learn from many sources to see different viewpoints. For example, just reading about Buffett's annual performance of 20%+ would make a 300%+ annual return with principal guarantee sound like a fairy tale. If this company is so good, why doesn't it just trade its own money?

2) When it comes to investing money, there is virtually nothing without risk. Guarantees are only worth the honesty and business making the guarantee. More fundamentally, just calling a product guaranteed doesn't make the underling asset (in this case, currencies) any less risky.

3) There is no substitute for effect due diligence when evaluating investments or managers. The ironic thing about the examples in that article are that many investors distrusted brokers but ultimately lost it all to a business they trusted. Many read statements/web profiles from Secure Investments but didn't verify or see with third-parties about the validity of such statements.

There are many more, but the consistent theme here is that like most things, there are no shortcuts.