5 Myths About Investing
by: Dr. Boyce Watkins

There is a lot of hoopla that continuously circles around the subject of money.  It is very similar to the days of snake oil salesmen, taking advantage of the hopes and dreams of many to fill the coffers of the immoral.  When I watch many of the late night “Get rich quick” schemes, I find myself thinking that perhaps the only person getting rich is the person selling the silly books and tapes.  I also see many alleged “financial wizards” on various cable television channels, selling one gimmick after another.  Some of the advice isn’t bad, but much of the advice has me shuddering as a Finance Professor.  After reading some of these books, I then go to class and tell my students how ridiculous some of these “experts” can be.  This is not to say that all of them are wrong, but they can sometimes be misleading.

Being mislead causes the most pain to those who do not understand money.  Many people do not understand the basics, which can make them vulnerable to those who use long words to confuse them.  When I teach my courses at Syracuse University, I use simple techniques to share complicated concepts, and I find that the topics are well understood by the student in no time.

I have compiled a list of quick and dirty myths about money and finance that can help you to get started on your path toward financial understanding.

Myth #1) An investment is only good if it helps you to earn more money

To listen to some of the financial advisors tell it, you would think that every penny you ever invest should be invested in things that are going to give you a financial return.  They tell you stories about how investing your money to make more money leads to your being smarter than the next person, and that you are going to have a happier life.  They also make money the most important thing on earth, and you end up feeling bad if you are not a money fiend, constantly hoarding money and allowing it to dominate your personal life.

All this is fine and good.  Sometimes, money should be used to make more money.  But this is only true if more money also implies more happiness for you than alternative investments of that money.  There are times when hoarding money is not going to give you as much short or long-term satisfaction as buying a car, or taking a vacation.  Also, if the sole objective of money is to make more money, then that means that you should just send your children to Dr. Kervorkian (the man who kills people for a living), since kids are expensive and don’t give you any of your money back.  Don’t be so hard on yourself when it comes to investing money.  Investment is like working at the office or having sex:  it should be done in moderation, and you should also consider the fact that although an investment doesn’t give you money back, getting happiness back is really what it’s all about. 

Myth #2) Only some investors have a portfolio

What is a portfolio?  A portfolio is a set of valuable investments that give you a return.  When I ask my students “How many of you have a portfolio?”, only a few of them raise their hands.  I then explain that making an investment means putting a scarce and valuable resource toward something that is going to give you something back either in the present or the future.  One thing that the students do not realize is that money is NOT the only scarce resource that you can invest.  You can invest your time, your energy, your body and even your love into something.  All of these amount to allocations of scarce resources, and we are making these investments every single day.  The decision to get out of bed is an investment, since you could easily invest that same time by lying around and watching TV.  The clothes on your back are part of your portfolio, since you have invested to obtain them, and they do provide you a return (your reward for investing is clothes is that you get the peace of mind of not having to walk around naked!).  

This is a more complete way to think about investing.  Money is only one kind of investment, and it is sometimes the least valuable thing that we invest.  You have heard people say “time is money”. Well, that’s not true, since time is MORE VALUABLE than money!  If you are 22 years old, and you waste your time in prison, you will never get to be 22 years old again.  No amount of money can make up for being in prison falsely for 15 or 20 years.  However, if you lose money, you can usually get it back later.  So, whether we have money or not, we are always investing.  We also all have a portfolio that is not much different from a portfolio of stocks. For example, our collection of friends might be a portfolio that is very valuable to us.  We invest in those relationships by spending time with our friends so that we can have happy relationships with them that last into the future.  We diversify our friendships and some of them have risk, just like a stock portfolio.  So remember, EVERYONE has a portfolio, not just the people on WALL STREET!

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