Lesson 3. Don’t Lose MoneyNegative Sum Games
The first question to ask regarding any investment (and I use that word loosely here) is, Will the AVERAGE player make or lose money? Note: by average player, I mean all persons involved in the investment activity excluding the “house” (i.e., the person running the game).
If the answer is lose, then no matter how talented, lucky or gifted you think you are, don’t play! A partial list of some “negative sum games” is shown in the box at the left. (Regarding insurance, yes, I know some coverage is necessary and required by law, but the average holder will spend more for the policy then he will ever get back–so limit and think carefully about your insurance purchases.
Another important topic is “Scams”. Americans lose over $50 billion a year to them. Even smart, sophisticated investors are susceptible (think Bernie Madoff). In the video below I list four signs to look for in investment scams. (BTW, Madoff matches everyone of them.) I suggest you check it out.
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