Investment lessons from learning to ride a bike

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How to navigate risks with confidence and caution.

I can remember the first time I got a bicycle. I was ecstatic – it was a blue Raleigh bike with a set of training wheels. For weeks, I confidently paced around our driveway, showing off how fast I could go and how easily I could turn the bike.

We have all come across people who said something along the lines of: “Investing is not for me. I’d rather keep my money in a bank account because at least I won’t lose anything.” The sad reality, however, is that although your rand amount does not go down, your purchasing power does. Morgan Housel writes about the lessons that investors usually learn and uses the following quote from Jason Zweig: “, the lesson people learned from that was not, ‘I should never speculate on overvalued financial assets.’ The lesson they learned was, ‘I should never speculate on internet stocks.’ And so, the same people who lost 90% or more of their money day trading internet stocks, ended up flipping homes in the mid-2000s and getting wiped out doing that.

In 2024, we still have examples of pyramid schemes and people misleading investors about potential returns and making false promises. Why? Because there will always be people who desperately need them to be true. Before you think of removing your hands from the proverbial handlebars and investing in these types of schemes, think about how realistic the proposed returns are.

 

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