When reading (or listening to) a sales pitch, you have to read between the lines. Copywriters and salespeople want to persuade you to act. To accomplish their goal, they need to push your buttons. There is nothing wrong with that. As consumers, we read sales copy, flip through catalogs and brochures, and listen to personal pitches precisely because we want our buttons pushed. We like buying and want to be sold. But we also want to make good buying decisions. So we avoid bad or inappropriate products — and that requires being able to read between the lines, or to “deconstruct” the sales message.
I’ve selected Mr. Longfellow’s copy because (a) it happened to be in my inbox this morning and (b) it contains most of the tricks copywriters use to sell investment products. Let’s start with his assertion that “you don’t need experience.” This is certainly true on a literal level. You aren’t required to demonstrate trading credentials to buy Mr. Longfellow’s program. If you ignore the copy and study his order device, you realize that all you really need is $149 to get his program. That’s what “you need no experience” really means.
Copywriters know that consumers are sometimes afraid they won’t be able to understand or use the investment program they are selling. So when selling a sophisticated product like a currency-trading program, they overcome this fear by telling you that “you need no experience.” Maybe you do; maybe you don’t. If Mr. Longfellow’s program is clearly written, it may indeed be possible for a beginner to do it himself. But that doesn’t mean currency trading is something an inexperienced person should be doing. Yes, inexperienced investors make mistakes based on their lack of knowledge, but the big money they lose is because of emotional mistakes — most commonly trying to recoup losses by investing more.
You can — copywriters will remind you — gain experience by “paper trading” (not actually investing money but just pretending to and keeping a record of your wins and losses) for a time. This makes sense theoretically, but it doesn’t work in actual practice. Until you are actually losing (or winning) real dollars, you don’t know how you will react. When it comes to experience, it’s best to remember the old saw: If you take two men, one with money and the other with experience, and put them in business together, the man with experience will wind up with the money and the man with money will wind up with the experience.
Next, let’s consider Mr. Longfellow’s claim that his program “requires little money.” That is, no doubt, literally true. You can certainly start investing in currencies with “as little as $500,” but chances are you’ll lose the first $500 you invest. What do you do then? Throw away the program and go back to mutual funds? Unlikely. You will probably try another investment for $500 … and if that doesn’t work out, maybe “just one more” … and then after that “one last — really last — one,” but this time at $1,000 or more. Literally, you can start with $500 — but it is probably foolish to do so.
A smarter choice would be to set aside a certain sum of money to begin with, say $5,000, and give yourself 10 investments to see how the program works. Don’t have $5,000 to test the system? Don’t buy it. Incidentally, I’m not suggesting that you can give Mr. Longfellow’s program a fair test for $5,000. It is more likely to take $50,000. What I’m saying is that you need to (a) know how much in total you need to commit to and (b) get out after investing that amount of money if the system still isn’t working for you. Mr. Longfellow says his system requires little work. That may be true too, on a literal level. It may be, for example, that Mr. Longfellow provides you with monthly trades — just-do-what-I-say advice. That is certainly easy enough to do, but it doesn’t mean the profits are easy.
When you are dealing with leverage — and you are almost certainly dealing with leverage when you are trading currencies — big profits mean big risks. (See Message #810, “The Thing About Leverage”.) There are ways to reduce those risks, but either the reductions will be modest or the profit will be diminished. In more than 20 years of working in and around the investment business, I’ve never seen a single investment that provides much higher than average returns with low risk. The best one I know is local real estate and even that has its risks — particularly if you don’t have enough cash to tide you over when the market softens. So don’t fall for the idea that you can quintuple your investment easily or safely. It’s just not possible.
I’m giving you advice that (a) you probably already know and (b) I’ve sometimes ignored myself. But that doesn’t mean you shouldn’t listen to it. You should. I’m not criticizing Mr. Longfellow’s program. It may be the best thing of its kind on the market today. Nor am I saying that you shouldn’t ever succumb to the temptation of this kind of investing. If you have the money to do so and if you limit your investment (my recommendation is 1% of the total amount of money you have invested), you have my blessing.
The purpose of today’s message is simply to remind you that when you buy an investment program or decide to invest in something, you should take the time to think about the promises that are made. Recognize that the salesperson’s job is to sell you. And accept the fact that when it comes to investing, you may be inclined to gamble. Deconstruct the sales message so you’ll at least know what you are buying. And limit your investing — so that your heart (which has no brain) can’t push you into the poorhouse.
[Ed. Note. Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]
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