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Suppose you created a Ponzi scheme that worked like this: For every dollar someone thought they were investing in your scam, you simply kept ten cents and put the rest in the bank, not invested in any way.

Every month you would generate a fake statement showing that your victims earned some healthy return, say 15%. You wouldn't need to worry about people withdrawing money because your fund would allegedly be the best around, at least according to your fake statements. And you'd still have 90 percent of the money sitting in the bank in case someone really needed some back.

This scheme would be highly illegal of course. It would also be one of the best investments anyone could have made over the past ten years, assuming few people withdrew any money. Most legitimate investment funds lost more than this hypothatical fund.

Almost everything I ever learned about investing turns out to be wrong. I learned that buying and holding a diversified portfolio of stocks was a sure winning strategy in the long run. So far, my lifetime stock investments are negative.

I learned that the safest investment is real estate, especially in California, because "they aren't making any more land." That theory hasn't worked out too well.

I learned that investing in California municipal bonds was extra safe because they were insured. That's great until the insurance companies themselves become insolvent.

So if everything that was good is now bad, is there any investment that we all assumed to be bad that is now good? (Other than stuffing cash under the mattress. Too obvious.)
 
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Mar 26, 2009
When times are bad people go for simple pleasures - movies, candy, women's cosmetics (especially red lipstick). Pick the leading companies with strong market share and a big economic moat. Some of them are on sale, as much as half off!
 
 
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Mar 23, 2009
My 9 year-old daughter bought a 1/10 ounce gold coin for around $100 two years ago, because she's into coin collecting and wanted a pretty gold one.

I invested $100,000 in a broad spectrum of diversified....

She's up about $100 dollars over the past two years... me?... not so much.

The new sound investing advice: Buy what you thinks looks pretty, even if it's very expensive.
 
 
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Mar 20, 2009
Congrats Scott. It's good to see that a man with an economics degree can understand why Cash is considered a "safe" investment. That's almost worth paying for twice.
Forget the Ponzi fraud part - just tell people they aren't going to lose all their money and in an unstable economy you can rake it in. Had you invested in cash 2 or 3 years ago, you'd almost certainly be in a better position than if you'd invested in any riskier high-yield schemes.
Of course, in the face of a recession of the current magnitude, even cash isn't safe. Especially not USD or GBP.

Right now you should invest in CNY and YEN (for S. Korea more than Japan)
 
 
+1 Rank Up Rank Down
Mar 18, 2009
So many comments, so little time.
Yes, there seem to be two distinct roads in life...one involving money, the other constituting everything else...like fun and love.

Since we're on the money track here, lets try and define what the stuff is: a medium of exchange AND a store of value, at the very least. Yes various commentors have pointed to baseball cards or comix or other trivia, most don't mention what the point of money is.

We have dollars as alleged money. Dollars are a currency and certainly a medium of exchange in shopping center USA. However as a money they suck. They are not currently - and haven't been since 1933 - been a store a value, when they were [note the language here] good as gold.

Scott Adams is unfortunately cursed with an MBA education and has read a collection of poof books published by financial interests that hate gold. In his 9 rather good things to do besides investing in stocks...he never mentions the ONE thing that might protect his purchasing power, and actually make him some real money in the process - buying gold.

Full disclosure: I'm NOT a gold bug, I'm a gold bull investor investing in a gold bull market that has been going on for 9 years now, not that Wall Street disinformation services would ever mention it. My rather biased views on this subject can further be found at www.financialfoghorn.com.

Otherwise, I'm hedging my bets and joining Dogbert's Ruling Class...

Financial Foghorn
 
 
Mar 18, 2009
I should have invested in sugar-free crack when I had the chance. That balloon has well and truely flown.
 
 
Mar 18, 2009
cats. many many cats. of course you'd have to put a high value on the return - having your eyelids licked in the morning, small furry lawnmowers sitting on your chest while you watch dvds, vet bills >$500 to treat "kitty herpes", curtains in tatters from feline wall repelling, and many many small personal space heaters when snoozing . . .
 
 
+3 Rank Up Rank Down
Mar 18, 2009
Investment priorities:

1. family
2. friends

They matter. They get you through anything. Without them, nothing else matters.
 
 
Mar 18, 2009
Scott, you know the answer, because you've written it down: Happiness creates money. Whatever you spend for your own happiness is not lost and yields instant benefit.
Investing in stocks contradicts another one of your statements: stockholders are strangers you'll never meet (if you're an employee), and so are the employees and middle management (where all the damage happens), if you're a stockholder. Don't invest into pathetic failure (which, by experience, is all that man achieveth).

Bertram
 
 
Mar 18, 2009
JELLO! You can never have too much Jello, as long as its powdered does it ever go bad? If the dollar goes bad you can trade Jello to all of the starving people for comodities like Cars, houses, former AIG executives who spent all their time getting worthless money. and you can get Green Jello so its even money like!!
 
 
Mar 18, 2009
Scott's (index fund buy own home time) theory of investing seems to have been forgotten by Scott. Specifically, the "time" part. (though I suspect he's using dramatic license to get a laugh).

During a financial crisis, everyone panics, ergo the crisis. Just as during a bubble, everyone (illogically) thinks that prices will keep going up, and behaves like bipolar chimpanzies on a sugar high, everyone similarly becomes (illogically) manic depressive to the max during a downturn. Even an eminently logical cat like Scott.

The problem is exacerbated by the ying-yang body politic that exists in the US right now, where solving a problem is exponentially less important than being right. On both sides, being a drama queen is the best way to prove that the other guy is wrong, and to boost your own, (apparently incredibly low), self-esteem.
 
 
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Mar 17, 2009
I'm surprised nobody has suggested this one yet, but have you considered investing in me?
 
 
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Mar 17, 2009
Rare comic books don't go down in value. Spiderman and Superman are great investments.
 
 
Mar 17, 2009
Dave Barry once said that "the best thing to do with your cash is put in a can and bury it in the ground. If you want to diversify use two cans."
 
 
Mar 17, 2009
How weird is it that in my RSS feed of your post, there was an advertisement for scottrade.com, Trades for $7! I had to click through it to see if it was legit or just a funny fake ad that was part of your post. It actually looks legit.
 
 
Mar 17, 2009
Money under the mattress is sounding more and more like a plan.
 
 
Mar 17, 2009
Any time you hand your money over to someone else to play with (invest) on your behalf, you're transferring ownership and trusting they will give the proper value back. That whole idea fails when human nature gets in the way when greed and incompetence overrule trust.

No, there is no safe investment.

I'd really like a follow-up to this post. I'd love to hear if anyone thinks there is sure thing out there.
 
 
Mar 17, 2009
You're best investment is in yourself. You have the potential to out-earn any of your other assets.
 
 
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Mar 17, 2009
BASEBALL CARDS!!!!!!!
 
 
Mar 17, 2009
The entire modern economic system IS a ponzi scheme.
 
 
-2 Rank Up Rank Down
Mar 17, 2009
I'm studying Peter Schiff's books and mp3's (http://www.europac.net/radioshow_archives.asp) to understand how our financial system works and what and where to invest my money in.

Try it Scott.
 
 
 
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