Imagine for a moment that our investing goal is to fail and become poor retirees. How would we lose as much money as possible in the shortest amount of time and be sure that our future investments are just as disastrous?
Here are six effective ways to achieve our goal:
1. Neglect to save
If we keep putting more money into savings, especially if the savings exceeds our expenses, you are not going to be very successful at failing. The key to guaranteed poverty is to spend more money than we have by using credit cards we cannot afford to pay off. We can also take up gambling, tear up any financial plans and budgets and just go with the flow.
2. Avoid productive assets at all costs
What if, heaven forbid, we unintentionally accumulate some savings? Don’t fret. All we need to do is leave it all in cash and wait for inflation to do its magic. Over time, it will ensure that our money loses more value each year. Under no circumstances should we look for the lowest fees and never, ever, put money into high-interest online savings accounts.
3. Forget about diversification
Diversification is not going to bring us any closer towards reaching our race to the poverty line. By not diversifying, we will be exposed to additional company specific risks. Try investing in a low-quality miner, small biotech or the next great idea. We must make sure that we put all of your money into those investments and success is ours.
Also, remember that broadly diversified, low-cost index funds that regularly outperform active managers are going to make us wealthier, not poorer. If we want to be poorer, we need to base our choice of fund managers only upon their most recent quarterly performance. Do not ask about fees. For those of us that are more adventurous, we can take a chance with macro predictions and trade commodities like gold and oil.
4. Start building lots of debt
To speed the process up a bit, amass as much debt as possible. My suggestion would be to use complex instruments like margin loans and CFDs. I recommend this because we can be forced to sell at exactly the wrong time. We just have to make sure that it comes with at least a 300-page disclosure statement. Short stocks are another method to get started on losing your money right away.
5. Trust your emotions and follow the fads
Tune into the business news frequently and pay close attention to the segments where they make recommendations about what to buy. That will ensure that by the time we log into our account online, everyone else watching that same news segment has bid up the price. When there is a market panic, we should always react and sell immediately.
6. Trade often
Trading often will hasten the accumulation of brokerage fees. In addition, having the opportunity to make more decisions means more opportunities to fail. Regular trading will also protect us from those capital gains tax discounts and franking credits that are sure to derail our progress.
Here is my parting advice for reaching our goal of becoming penniless-
Timing will determine success, not fundamentals. Keep your eye only upon what you have to gain and everything else will work itself out.
Sounds almost ridiculous right? Unfortunately, this is in fact how most people conduct their financial and investment affairs…