Sven
02-24-2009, 07:41 AM
If you delve in to investments of any kind, you sooner or later should come across that piece of advice. It is one of the true basics if you want to make any kind of investment.
Yet, a lot of the stories you hear at the moment about people losing fortunes at the moment show that a lot of people did not use that rule as a guide.
In Holland a lot of people may lose their house or may lose their pension because they have taken out mortguages or pension arrangements based on a stock based insurance policy. They believed the salespersons that said, "The stock market may go down again at some point but it is unlikely".
For me it has proven to be a valuable rule. No matter how tempting it may have looked, I have never invested in things I did not understand, nor have I invested in a way I did not understand.
To me "Do not invest in what you don't understand" comes even before "If it sounds to good to be true, it usually is" as it is more basic.
Yet, a lot of the stories you hear at the moment about people losing fortunes at the moment show that a lot of people did not use that rule as a guide.
In Holland a lot of people may lose their house or may lose their pension because they have taken out mortguages or pension arrangements based on a stock based insurance policy. They believed the salespersons that said, "The stock market may go down again at some point but it is unlikely".
For me it has proven to be a valuable rule. No matter how tempting it may have looked, I have never invested in things I did not understand, nor have I invested in a way I did not understand.
To me "Do not invest in what you don't understand" comes even before "If it sounds to good to be true, it usually is" as it is more basic.