Guard Thy Treasures From Loss


“The first sound principle of investment is security for thy principle. Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. The penalty of risk is probably loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own romantic desires to make wealth rapidly.”

-The Richest Man in Babylon

As we continue to explore the advice from The Richest Man in Bablyon, we have been looking at The Seven Cures for a Lean Trading Account. So far, we have talked about saving 10% of our income, taking an honest look at our expenses, and finding ways to multiply our savings.

The fourth cure for a lean trading account is something that should especially hit home with traders. It is the idea that we must protect our principle at all costs in any investment we make.

Arkad once again tells the story of his first investment where he gave a brick layer his savings to purchase rare jewels that turned out to be glass. In hindsight, this was obviously a terrible idea, but how many times have to taken a tip from someone who actually had no clue what they were talking about?

Everyone wants to find the perfect get rich quick scheme, even if they aren’t willing to admit it to themselves. Arkad refers to our “romantic desire to make wealth rapidly.” I definitely have a good bit of that inside of me.

Of course, our rational thinking selves are well aware that the only way to become an “overnight success” is to first put in years of work.

One of the advantages that is available to us is the fact that there are many successful people who are willing to freely give advice on how to follow in their paths. The trick lies in following the advice of the successful experts and ignoring the advice of the idiots, assuming you can distinguish between the two.

Allowing a bad investment to wipe you out can have a devastating impact on both your future earnings and your current mental state. That is why we must be extremely cautious about putting our money to work early in our careers.

We would all be well served to follow the advice that Jim Rogers gives us in his Market Wizards interview:

“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”

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