The Way to Get Rich Quick is to Do It Slowly
If it’s too good to be true, don’t trust it. Rather, run as far away from it as you can. I get it — It’s easy to fall into the trap of a get rich quick scheme when the offer sounds too tantalizing and promising to refuse. But, almost always, these schemes are a wolf in sheep’s clothing.
They look innocent on the outside, but the core of the scheme is misleading, deceiving and almost always manipulating your emotions. They promise great returns with little risk, going against typical investment dogma. However, before you know it, you’re neck-deep and losing half of your life savings.
So, how do you know what to believe as trustworthy? Well, read on and, hopefully, I can answer that question for you. But, first, I want to give you 2 excellent examples of get rich quick schemes that have taken the world by storm in the recent past.
Get Rich Quick Scheme #1: The Bitcoin Bust
Does anyone remember the Bitcoin hype of 2017? In a matter of months, the price of Bitcoin increased over 1,500%. Those who had bought a single (or several) Bitcoin for $1 in 2011 were celebrating when the price skyrocketed to an all-time high of $19,783 in mid-December 2017.
However, the exponential rise in Bitcoin was short-lived. By early February of 2018, the price had dropped to below $6,000 — a drop of over 70%. It has since been termed the “crypto crash”.
But what exactly is Bitcoin? Take a look at this video to get a better idea:
https://www.youtube.com/watch?v=Gc2en3nHxA4&feature=youtu.be
So why is Bitcoin considered a get rich quick scheme?
Blame human psychology. Very few people are investing in Bitcoin because they consider it the “currency of the future”. Rather, most tend to invest because of the hype surrounding it. Have you ever heard the saying: “Get one to go and they will all go”? We’re often a bunch of sheep being herded by our emotions.
And, like most investment bubbles, the fuel that drove most people to invest in Bitcoin was the soaring rise in its price. Very few people understood what Bitcoin was, but they came in droves to give up their hard-earned money to invest in a currency that had previously been associated with black market drug deals. But, who cared? You could get rich quick, right?
Unfortunately, most people learned the hard way that Bitcoin wasn’t as secure a goldmine as they thought. There are stories of people having lost their entire life savings because of it.
But don’t feel like you’re alone if you got sucked in. Even personal finance bloggers, like myself, got enamored by the hysteria. When November 2017 rolled around, I was watching the Bitcoin price more closely than I was my actual bank balance. And, yes, in case you were wondering, I did lose a little money as a result.
Get Rich Quick Scheme #2: The Pyramid (or Ponzi) Palaver
The next get rich quick scheme is one that is a little more sneaky. I’m sure you’ve heard of a Ponzi or pyramid scheme before in the news, but do you actually know how it works?
Essentially, the pyramid schemer devises an investment offer with outrageous and mouth-watering returns. This is done to attract a set of initial investors. Once the initial investors commit, the schemer pays them what they were promised. Word spreads like wildfire that the initial investors received their promised returns. As a result, hoards of new investors rush in to hand over their money to get their piece of the pie.
However, what the new investors are unaware of is that the schemer uses their money to fund the high returns of earlier investors. As a result, promised returns are always reliant on new investors coming on board. The moment the new investors dry up so does the scheme. It can be catastrophic when new investors get excited about seeing their returns and invest all their life savings into the scheme, only for the scheme to fall apart.
In fact, a recent situation in South Africa used the hype of Bitcoin and the strategy of a pyramid scheme to lure people into a disastrous investment. Some investors even took out bank loans to buy into the scheme. I’ll let you read how the story ended.
The Way to Get Rich Quick is to Do it Slowly
It may sound counterintuitive. But it’s true. The way to get rich quick is to do it slowly. Because there aren’t any get rich quick schemes that actually work.
An interesting article was recently published on Moneyweb, by Patrick Cairns, which spoke of different scenarios in which investors tried to time the market. This is often used to better their performance — or, in other words, get rich quick.
“Just missing the single best day of performance over these 24 years would mean that an investor would see only 92.8% of the return. That is a substantial reduction for missing just one trading period out of the 6 000-odd days in this sample … “But on the flip side, suppose you could avoid the worst day, your portfolio would have been 13% better,” he added. “If you missed the worst five days you would have 53% more and missing the worst 10 days would mean you would have 110% greater.”
Essentially, what this article is saying is that getting rich is a long game and there’s no point in trying to predict or create shortcuts. There’s a great investment quote that usually does the rounds: it’s not about timing the market, but rather the market.
This is not only restricted to investing. The same could be said for all aspects of our personal finance journey. Whether it relates to your side hustle, job promotion, budgeting journey or savings for retirement, realize that you’re running a marathon, not a sprint. To get rich by any of these means takes time, patience, persistence, and perspective.
J.D. Roth, a contributor to Forbes, calls this the Get Rich Slowly philosophy, that I believe have incredibly valuable nuggets of wisdom.
Related: Becoming Buffet: 10 Things You Need to Consider as a Beginner Investor
If You Don’t Understand What You’re Buying, Walk Away
Warren Buffet has been quoted as saying: “Never invest in a business you cannot understand.” To that, he added that when he is considering an investment, he places it into one of three boxes: in, out or too hard. Almost all of his investment decisions land up in the “too hard” box. Because let’s be honest, you cannot understand every investment opportunity out there. And Buffet is willing to accept that. He sticks with and puts his money into opportunities that he understands.
Given that Buffet is a multi-billionaire, I think it’s safe to say that he knows what he’s talking about. This affirms the fact that if you don’t understand where your money is going, then don’t put your money there in the first place.
As I mentioned earlier, so many people funneled their money into Bitcoin with little understanding about what it was, how the price was affected, how to keep their money secure, and the tell tale signs of an investment bubble.
If you want to invest your future in a unit trust or company or currency or side job, do the research and find out all you can about it. Find out whether the opportunity meets your standards, morals, ethics, goals, and time horizon. If anything sounds too good to be true, walk away. If anything confuses you, walk away. And if anything does both, definitely walk away.
Conclusion
In this day and age, it’s so easy to fall prey to the greedy, who suck you into investments and “opportunities” that you just can’t refuse. I encourage you to always question them by asking:
- Does it sound too good to be true?
- Do I fully understand the investment?
Do you know of any get rich quick schemes that others have tried to persuade you to join? Or do you have any questions that you ask yourself before making an investment? Feel free to comment on the post below.
Originally published at https://thesavingscientist.com on July 25, 2019.
