Beyond Buy-and-Hold #72
By Rob Bennett
I often refer to Buy-and-Hold as “the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind.” People are often surprised to hear me say that.
Am I getting at something in particular? What precisely do I mean to signify when I characterize Buy-and-Hold as “a Get RIch Quick scheme”? Am I just throwing dirty words around?
I hope I am not just throwing dirty words around. The phrase “Get Rich Quick” has a particular meaning in my mind. I mean something specific when I characterize Buy-and-Hold as the most intense dosage of that something that I have seen in my days of walking Planet Earth.
The distraction of empty promises
When people send you those e-mails asking you to deposit money in a foreign bank account, that’s Get Rich Quick. The e-mails always flatter you. That’s because the scammers need to have your emotions kick in and overcome your reason. Your reason would tell you to exercise caution when it comes to making deposits of large sums of money. The chance to make a killing because we are one of the so darn smart and special ones entices us to do things we otherwise would know not to do.
That’s what Buy-and-Hold is all about.
The trick to Buy-and-Hold is painfully obvious. That’s true with all Get Rich Quick schemes. It doesn’t follow that you’ll see it when I describe it to you. We all hate to acknowledge having been taken in by Get RIch Quick schemes. So we work our minds overtime trying to come up with rationalizations for investing in foolish ways.
The trick to Buy-and-Hold is that you don’t bother checking to see whether stocks are fairly priced before putting money on the table. Huh? You wouldn’t buy a car that was priced at three times fair value. But millions of middle-class people have happily purchased stocks priced at three times fair value. Why? The stock-selling experts told them that they are special, that the laws of mathematics might not apply to them. Down goes the trap!
The institutionalized version of Get Rich Quick
So Buy-and-Hold really is Get Rich Quick. But I go farther than that. I say that it is the purest and most dangerous Get Rich Quick scheme ever concocted by the human mind. Why so strong?
How many people do you know who were taken in by the deposit-money-in-a-foregn-bank scam? And how many do you know who were taken in by Buy-and-Hold?
The Buy-and-Hold scam has taken a lot more money from a lot more people. This particular Get Rich Quick scheme has caused enough human misery to bring on what is already the second biggest economic crisis in U.S. history and one that threatens soon to take over first place. Buy-and-Hold has earned top honors in the money con category.
How can you avoid falling for Get Rich Quick schemes in the future?
You cannot do it by educating yourself. There are millions of smart people who follow Buy-and-Hold strategies. Education is not the answer here.
The answer lies in consideration of the wisdom of the saying “It’s impossible to cheat an honest man.” Cons almost always play to our self-inflated image of ourselves. Have you noticed how Buy-and-Holders are always putting down investors who follow any path other than the one they personally favor? Other investors are dumb. Other investment approaches are not backed by science. Only Buy-and-Holders are truly rational. Pride comes before an investor wipeout. Why? Because giving in to feelings of pride puts your emotions in charge of your ability to engage in reason.
Do I hate Buy-and-Holders?
By no means! I admire and respect and like most Buy-and-Holders. I enjoy talking things over with them. I count on them to point out weaknesses in my strategies, to let me know when it is me getting too full of himself, starting to think that his ideas are the best ever and the only rational ones and the ones that will triumph over all in the end.
We cannot banish our Get Rich Quick impulses. We all would if only we could. There’s not one person alive who views Get RIch Quick investing as a good thing. Yet millions upon millions stake their retirement money on Get RIch Quick approaches every day.
I think we might need to stop thinking of Get Rich Quick as “the Other” and just come to accept that it is part of us. Doing that might permit us to see it in places where we do not see it today. I don’t think for two seconds that the Buy-and-Holders want to be following a Get Rich Quick strategy. If they could become a bit more accepting of the charge, perhaps they could eventually become relaxed enough to see that there’s perhaps at least a tiny bit of merit to it.
I’ve only done half the job when I have identified Buy-and-Hold as a Get RIch Quick scheme. The more difficult and important task is figuring out how to get the Buy-and-Holders to abandon their Get Rich Quick ways. I cannot say that I have been super successful re that one as of today.
I’m working on it! I’m working on it!
Rob Bennett offers life planning tips at his website. His bio is here.
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