The richest man on earth by net worth is Jeff Bezos, the CEO and founder of Amazon Inc with a net worth of US$113 billion. However, he is only a 10th of a trillionaire.
The real trillionaire was King Solomon, the first person to earn in excess of US$1 trillion. His estimated net worth was US$2 trillion, 20 times that of Bezos.
He is known until today for his wisdom and many travelled far and near to listen to him, including the Queen of Sheba.
Imagine if you could ask him about investing. What would he reply? It might look something like this.
The emphasis will be on wisdom and insights over gold and silver. To invest for superior returns and sustainable wealth, you must study.
Wisdom is above money itself, as money will flow towards people who are wise.
That being said, many hope for a shortcut, a magic pill or a hassle-free method of investing. Their eyes are on gaining money, not wisdom.
Here are things most people experience if they invest without education or wisdom.
1. Being more prone to investment mistakes
In Malaysia, more than 900 stocks are listed on the stock exchange. Without wisdom, most people would ask for stock tips, which is not really investing but gambling as they may not know what they are getting themselves into and why.
The same applies to other investments such as real estate, businesses, exchange-traded funds (ETFs) and the list goes on.
2. Relying on ‘professionals’ for investments
They trust that the professionals would have studied things and would know more about investing so they transfer their decision-making to financial planners, fund managers, robo-advisors and so on.
This is fine if the professionals are genuine investors. For example, those who invest in Berkshire Hathaway Inc could view it as a mammoth unit trust fund managed by Warren Buffett, a living investment legend. Long-term investors would have built wealth with him for he is an astute, conservative and responsible businessman and investor.
But what of those you entrusted with your money are traders, speculators and gamblers in the stock, bond and ETF markets?
If your unit trust funds, ETFs, or robo-advisory funds incur regular losses, who is to be blamed?
Is it the fund manager, the market, the agent or financial planner who sold you the unit trust fund, or you, the investor?
A stock investor who picks their own stocks does make some mistakes and lose some money. But they have no one to blame but themselves and they own their mistakes and learn from them.
But, what about a wrong investment decision on, let’s say, a unit trust. What can you possibly learn from it to become a better investor?
Sadly, if your major lesson is to not invest in unit trusts or that unit trusts do not work, you have failed to gain an opportunity to learn and become a better investor.
3. Becoming reactive to the markets
Money is an emotional subject. Most investment decisions are influenced by our emotions.
Millions of people buy and sell stocks every day. They make their decisions out of different emotions and that is why the stock market is volatile and baffles logic. This also applies to other investment markets.
Without wisdom, people tend to make decisions based on emotion. When stocks rise, they get excited and want to get in on it. When they fall, people are disappointed and dump the stocks to cut their losses. As a result, they are more prone to lose money by buying high only to sell low.
What to invest in without studying too much?
The best thing to do is to not invest because it is the investor who is no good, not the investment. If you understand that and stop investing for the time being, that in itself is a form of wisdom.
Nobody is born an investment genius. Nobody is immune to making mistakes either.
All investors have their moments of stupidity and must learn from them. The key difference is learning and appreciating the wisdom. And this is what every investor should do.
This article first appeared in kclau.com
Ian Tai is a financial content machine, dividend investor and author of over 450 articles on finance featured in KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’, and ‘Small Cap Asia’ in Singapore. He is a regular host and presenter of a weekly financial webinar with KCLau.com.