We live in an impatient age, and when it comes to money we need more of it now, now, not tomorrow. Whether it is a deposit for a mortgage or clearing those credit cards that sap our energy long after we stopped enjoying what we bought together, the sooner the better. When it comes to investing, we need easy pickings and fast returns. Hence the present mania for crypto-currencies. Why invest in nanotechnology or machine learning if Ethereum is locked in an endless upward spiral and Bitcoin is the gift that keeps on giving?
A century ago, the American writer George S Clason took a different approach. From The Richest Man in Babylon he gave the world a treasure trove – literally – of financial principles based on things that might seem old-fashioned today: caution, prudence and wisdom. Clason used the wise men of the ancient city of Babylon as the spokesmen for his financial advice, but that advice is as relevant today as it was a century ago, when the Wall Street Crash and the Great Depression were looming.
Take for example, the five laws of gold. If you are looking to put your personal finances on a sound footing, wherever you are in life, these are for you:
Law No1: Gold comes thankfully and in increasing quantity to anybody who puts by at least a tenth of their earnings to create an estate for their future and that of the loved ones. To put it differently, save 10% of your income. Minimum. Save more than that if you can. And that 10% is not for next year’s holiday or a new car. It’s for the long-term. Your 10% may include your pension contributions, ISAs, premium bonds or any type of high interest/restricted access savings accounts. OK, interest rates for savers are at historical lows today, but who knows where they’ll be in five or ten years? And compound interest means your savings will grow quicker than you think.
Legislation No2: Gold labours faithfully and contentedly for the smart owner who finds lucrative employment for it. So, if you’re trying to invest rather than save, do it wisely. We are focusing on the words”profitable” and”employment”. Make your money work for you but remember the best you can hope for this aspect of the rainbow is steady returns over the long term, not lottery wins. In practice this is very likely to mean shares in established companies offering a regular dividend and a steady upward trend in share price. You may invest directly, or through a fund manager in the form of unit trusts, but before parting with one cent, see Laws 3, 4 and 5…
Law No3: Gold clings to the protection of the cautious owner who invests it under the advice of those wise in managing it. Before you do anything, talk to a qualified, experienced financial advisor. If you don’t know one, do some research. Check them out Online. What experience do they have? What kind of clients? Call them first and get a feel for what they can provide you with, then decide whether a face to face meeting will work. Check out their commission agreements. Are they independent or tied to a particular company, under contract to push that provider’s financial products? A decent financial adviser will encourage you to get the basics in place: retirement, life insurance, somewhere to live, before steering you towards investing in emerging markets and space travel. When you are satisfied that you’ve found an advisor you can depend on, listen to them. But review your relationship with them at regular intervals, say annually, and if you’re not happy, look elsewhere. Odds are, if your judgment was sound in the first place, you are going to stick with the exact same adviser for several years to come.
Law No4: Gold slips away from the person who invests it in businesses or intentions by which they not familiar or which aren’t accepted by those skilled in its keep. In case you have a deep understanding of food retail, by all means invest in the supermarket that is increasing market share. Likewise, if you work for a company that has an employee share ownership scheme, it makes sense to take advantage of it, if you’re sure that your company has good prospects. Nevertheless, you should never invest in any industry or financial product that you don’t know (remember the Crash!) Or can’t fully research. If you’re tempted to try your hand at money dealing or options trading and you have a financial adviser, talk to them first. If they’re not up to speed, ask them to refer you to someone who is. On top of that, steer clear of anything you are not sure about, no matter how big the potential returns.
Legislation No5: Gold flees the one seeking impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts his own inexperience. If you start scouring the internet for financial advice and wealth creation ideas, your inbox will soon be filled with”tricksters and schemers” promising you the ground if you’ll invest #999 in their”system” for turning #1 into #1XXXXXX on the Chicago Mercantile Exchange. Remember, the only one who makes money in a gold rush is the 1 selling shovels. Buy the wrong shovel and you’ll quickly dig yourself into debt. Not only will you pay through the nose for a system which has no proven value; by following it you will probably lose a lot more than the price you paid for it. At the very least you need to check real reviews of the product. And never buy any platform, investment vehicle or financial product from any company which isn’t registered by a national watchdog, such as the Financial Conduct Authority for the United Kingdom.
These five laws are of greater value than gold itself… Next time we’ll look at George S Clason’s seven cures for a lean purse.