Greed kills savings and investment plans, and wrecks a lot of futures. While we urge you to save and build wealth, you should be rational and reasonable in your hopes. The biggest reason why people lose money from investments is because excessive greed leads them to be careless. They ignore warning signs and take too much risk. People who are really greedy sometimes resort to breaking the law. Some people have made hundreds of millions of dollars and then lost it all because they couldn’t control their appetite for more money. Greed is like fire—you can easily be burned if it isn't controlled.
We aren't talking about the evil kind of greediness. We're talking about greed that comes from desperation. Most people aren't greedy in the evil sense of the word. But some, such as those in their 40's or 50's who have hardly begun to save, become desperate to build wealth for retirement and are tempted to take unduly large risks. That's how you can be badly burned. You can't change what's happened in the past. But you can avoid some bad consequences in the future. Keep your expectations within reason and don't try to get rich quick.
Money won’t buy happiness. You know that. But it’s worth keeping in mind. Having enough money to be reasonably comfortable without taking boatloads of risk (or breaking the law) will be conducive to long term happiness. People who crave really large amounts of money are often unhappy anyway, even if they end up with bazillions of dollars. If you don’t measure yourself by the amount of money you have, it won’t matter whether or not other people do.
Pursue reasonable financial goals and you’ll have a good chance of building long term wealth. Look at our investment guidelines for ways to avoid problems. Lay a solid financial foundation. Consider our model plans for saving and investing, which don't require you to take truckloads of risk. Avoid trying to make a fortune quickly. This is especially true if you don’t have that many working years left. The older you are, the more desperately you may want to build wealth. But you can’t afford to take large risks because you don’t have much time to recover from large losses should they occur. For ordinary investors, building wealth is a race that the tortoise wins, not the hare.
Beware of investment promoters bearing gifts. If a smooth talking, prosperous looking individual offers an investment that will return a 50% profit in six months, guaranteed, put your hand on your wallet and treat the person the same way you would a famished anaconda. If it sounds too good to be true, it probably isn't true. People who are greedy are easily victimized.
To continue with our savings and investing tutorial, please go next to our discussion of personal risks.