Recently I read a quirky little book called Don’t Swallow Your Gum. While the title of the book gives little away, the sub-title says it all: Myths, Half Truths, And Outright Lies About Your Body and Health. Between the covers of this entertaining tome the authors debunk a raft of medical fallacies.
You don’t need eight glasses of water a day. A man’s you-know-what is not related to the size of his feet. The sex of a baby cannot be determined by the shape of a mother’s belly. Reading in the dark won’t ruin your eyes. Twins don’t skip a generation. Sugar doesn’t make kids hyper. And milk doesn’t make you phlegmy.
Just as some beliefs related to our health and wellbeing are fundamentally false, the same holds true for some sacred cows in banking, finance and investment. Investors today are better informed than their forebears but ignorance is still bliss. So, let me correct some of the misconceptions among investors.
- You don’t have plenty of time to save for retirement – so start planning now.
- Estate planning is not exclusively for the rich – everyone should have a will.
- There’s no magic formula for investing – you can’t eliminate risk.
The 2008-2009 global financial crisis exploded a number of long standing financial myths. Around the world, economic dreams turned to economic nightmares. Here are some claims that have proven false.
- Real estate is a safe haven. FACT – it rises and falls like everything else.
- Borrowing to invest is a sensible strategy. FACT – many investors have been hurt by margin loans.
- The more sophisticated the investment the better. FACT – financial engineering gave us toxic, sub-prime loans.
- Brokers and advisers are better able to pick stocks. FACT – no one has a monopoly on wisdom.
The good news is that free market capitalism is not dead and financial markets do recover relatively quickly.
Legend has it that when you shave, your hair grows back faster and thicker. The bad news is that’s also a myth.
Now there’s some food for thought!
Sincerely
John (JT)Thomas
This opinion piece is provided by John (JT) Thomas, a 48- year veteran of the financial services industry and since 1987 a specialist in commercial mortgage funds. Considered by many to be the father of the modern commercial mortgage fund sector, JT helped establish and then managed – for 17 years – what became the largest and most successful commercial mortgage fund in Australia – The Howard Mortgage Trust – with assets exceeding $3 billion. Under JT’s stewardship, investors never lost one cent of their investments and indeed, investors always received competitive monthly returns. JT was also Chair of the $40 billion mortgage trust industry sector working group.
JT has been proudly involved with Princeton for nine years and sits on both the Princeton Credit Committee and the Princeton Compliance Committee as well as being an advisor to the Princeton Board.
