False Optimism: The Financial Slippery Slope

Provided By www.investmentoption.org

It is all too easy to fall into the trap of thinking you know everything about investing because you have made some successful guesses in the past. It is a person's natural tendency to accentuate the positive and ignore the negative, particularly when it comes to finances.

Many investors feel no need for obtaining advice on what to buy. Some people still "invest" in gold bricks, falling for ancient tricks. Others, preferring something modern, buy shares in a mining company whose printed prospectus, if they bother to read it, tells them that the company is practically a fake. However, we assume that readers of this article, although perhaps plenty careless, are not so gullible as those just mentioned.

Secretiveness about finances is customary. People do not talk freely about their experiences with investing. A speculator may brag about his successes, but he keeps mum on his failures, thus misleading his associates and himself. On the other hand, some men conceal the amount and source of their extra income; maybe they want to hide something from both their wives and the tax collector. With these customs of half-truths and secrecy on investments, people naturally don't learn from the experiences of their friends and neighbors, as they do on other subjects.

The superficial simplicity of investing fools people who in other respects are well informed. When a man has mastered a difficult job paying him a good income, he assumes that he needs no training on how to use his savings. In fact, the more financial success a man has gained in his main work, the greater the danger than his natural egotism will delude him into assuming that he also knows how to invest in other businesses without stopping to learn anything about them. Saving money usually requires a struggle, and necessarily involves the sacrifice of other things wanted. But most savers pay so little attention to learning how to invest that in effect they waste most of their effort to save.

As business is organized in the United States, anyone wanting to sell something must find some means of bringing it to the attention of prospective buyers. The usual way is to have the article stocked in retail stores located where the public can visit them readily, or to have advertisements placed where the public will see or hear them. A buyer does not, ordinarily, search beyond the stores, ads, catalogs, or other sources that he is in the habit of using. He assumes that competition among sellers has brought within his convenient reach articles that are good enough and cheap enough so that it is not worth his while to look for others in inconvenient places.

This habit of a buyer's expecting a seller to attract his attention works fine, up to a point. But sometimes this custom interferes with progress. Once an article of mediocre quality gets established as standard, then an item of higher quality has trouble in gaining attention.

In the investment field, buyers follow the same easy habits as in their other purchases. For instance, more people hold life-insurance policies than any other form of investment largely because for scores of years the life-insurance companies have had so many agents scouring the woods for customers.

Before making any kind of investment, do yourself a favor and research the firm, company or stock in which you plan to place your money. New technology allows people to obtain information about these entities and products that in earlier years would have required trips to the library and surreptitious phone calls. The means is there to gather information about potential investments, all it takes is the determination to take the time and do the legwork.

This article is a small snippet from www.investmentoption.org

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