In life, emotions often lead us to do things we regret, but in matters of money and investments, it is better to keep a cool head and avoid letting feelings govern our actions, otherwise we could lose savings and the capital that with so much effort we obtained.
Social media and traditional media are full of “success” stories of so-called financial “wonders” who struck it rich overnight in the financial markets, but they don’t pay nearly the same attention to how bad things are. many of those people end up.
Thus, for every short-lived success story, thousands of failures are overlooked, leading to false expectations and disappointment among unsuspecting investors who are always looking for the financial “holy grail” that makes them rich fast, easy and effortlessly. They never find it, because it doesn’t exist.
For this reason, in order to learn, we must pay attention to authentic financial tragedies, of which we can find among people who, during the days of post-covid-19 monetary stimulus, lined their pockets thanks to the “free money” injected by the US government and the Federal Reserve. (Fed) of that country.
This week, the American daily The Wall Street Journal reported, for example, the case of trader 25-year-old fan Omar Ghias, who – in the grip of a speculative fervor that spread to all markets – accumulated approximately $1.5 million from rising stocks during the early part of the pandemic.
But as his earnings increased, he also spent more, whether it was betting on sports and going to bars or buying luxury cars. Worse, he borrowed heavily to expand his positions in speculative instruments, which initially gave him good profits thanks to market volatility.
The problem is that nothing dulls or blinds an investor more than “quick and easy” profits, whose addictive effect makes the worst of drugs seem like children’s candy.
It is no coincidence, then, that for Ghias the market was “like a casino”, in his own words, spending the nights in bars drinking Don Julio 1942 tequila and driving around in a black Lamborghini. “I felt like I was indestructible. It was kind of irrational,” he admitted.
And when the bull market ended, his fortune evaporated because of his wrong bets and excessive spending.
Today, to support himself, he works in a Las Vegas convenience store where he is paid about $14 an hour plus tips. “I’m starting from scratch,” she told the journal.
Omar is certainly not the only one. Other trader Interviewed by the newspaper was Navroop Sandhu, 32, who started trading at the start of the pandemic using the eToro platform. “It was like a snowball effect, where I got addicted,” she said in reference to her early earnings. She now only places between two and five operations per week, when before she used to do up to 10.
Similarly, Jonathan Javier, 28, saw his portfolio double through November 2021, but by mid-2022 it was down 8 percent. He has moderated his regular investments, but in 2023 he is again buying some tech stocks. Some never learn.
Javier said: “I now know that the key to making a profit is to buy when the stock is low, rather than just buying and ‘hoping’ for a profit”. But perhaps that lesson was learned too late.
In short, as I tell you, there are many more experiences of this type, because time and time again Investors are blinded by inflated prices of stocks, currencies, cryptocurrencies, or any other asset.
Perhaps they have not understood the simplest but most difficult lesson to learn: investing is a race of perseverance in which reason must prevail. The important thing is to generate value, accumulate it, keep what we have earned, reinvest it and accumulate more continuously to expand our wealth. There are no short cuts! Looking for shortcuts to what – I reiterate – is a race of perseverance leads us to a fast track… but towards failure and bankruptcy.
Editor’s Note: This text belongs to our Opinion section and reflects only the author’s vision, not necessarily the High Level point of view.
William Beard Master in Economics from the Austrian School; liberal, gold market specialist and editor of investment newsletter Top Money Report