FINANCIAL DISASTERS CREATE MISERY, BUT THERE IS HOPE

#investing #investors #TheBigShort

The year 2008 was a pivotal financial year for most of us.

If we didn’t lose our home, lose our job or lose our retirement savings – or, God forbid, all of the above — we were among the lucky.

The movie “The Big Short” illustrates how the economy can collapse when Wall Street gets creative, and mixes in a little fraud.

In many cases, we are asked to sign documents we don’t necessarily read from cover to cover. If you’ve ever bought property or gotten a mortgage, you rely on the person who is presenting the material to you to give you a summary of what it all says. We tend to trust that person explicitly that we are not being led down a destructive path – one that means big money to him or her at our expense.

Not only do we, generally, not have time to read such documents cover to cover, even if we did, we would not understand some of them. Some people don’t want us to understand them, because they’ve put something in them with a “gotcha” that hurts us.

“The Big Short tells a story that the Wall Street bankers themselves didn’t read what they were signing on for. When a few decided to read the documents, they found them filled with risky mortgage investments that were not highly rated. So, they created vehicles that allowed them to bet against those investments.

Many of those on Wall Street do what they can to make money quickly. When greed sets in, fraud becomes a great threat. Still, many who work on Wall Street are good, honest people. Even they get caught, sometimes unwittingly, into the mess when such messes occur.

We who are not on Wall Street have to make money the old-fashioned way, with work, savings and time. Many of us don’t have the wherewithal to turn around a quick investment that would make a fortune that will last our lifetimes.

Still, we don’t have to resort to greed, fraud and financial “creativity” to make a potential fortune. There are many ways out there for those of us not on Wall Street to turn our financial situations around. For one of the best, visit www.bign.com/pbilodeau. Yes, you’ll still need time to realize the potential, but the trajectory could be considerably shortened from that of relying on a traditional job.

“The Big Short” also revealed how bad the investors who bet against the risky mortgage-backed securities felt when their wisdom paid off. It hurt them that their profit came at the expense of many other innocent people.

The moral, perhaps, isn’t that making a profit is bad. It’s more on the angle of how one makes a profit. If he can do it without hurting others, that profit feels much better.

If one can make a profit by helping others do the same, that’s ideal.

Most investment advisers suggest that, as an investor, one must remove emotion from the decision-making. A few develop investment products designed to make the world a better place, making the investor feel good about what he is doing.

The range, perhaps, between those two extremes is to invest in things that help others, while having a plan to help oneself have, say, a comfortable retirement. Proper investing can lead to a degree of comfort, even when greed and fraud on Wall Street is exposed, or when circumstances take the markets in wild directions.

No market goes up in a straight line. Success comes with failures mixed in. But a good, prudent plan can protect each investor from almost anything. Good advice from someone you trust is essential, preferably not from someone who gets “creative” with financial products.

Peter

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