As the Bitcoin rollercoaster continues its wild swings, you may be tempted to think that the opportunities to get rich quickly from investing in the cryptocurrency are unprecedented.
In fact, asset bubbles have been common throughout the entirety of human history. One of the recently popular versions in the Arabian Gulf is buying real estate in an emerging economy, such as houses or condominiums. However, these experiences have delivered a consistent lesson to prospective investors: stop trying to get rich quickly. Why is that the case?
Before I explain, it’s worth pointing out why people continually strive to earn life-changing returns in short spaces of time, with minimal effort. While gamblers will, on average, lose money, there will always be a small percentage who win big, just like the winners in a lottery. Today, in the age of social media, these people will get high exposure, and they will act as living proof of the ability to get rich quickly.
The attractiveness of the gambling/investing route to rapid wealth accumulation is accentuated by the unattractiveness of the alternative way of becoming very rich, which is becoming a successful entrepreneur. Self-made millionaires invariably have to work extremely long hours, suffer severe stress, and expose themselves to high levels of risk. Almost nobody is willing to tolerate such conditions, except for the super-driven, meaning that ordinary people have a choice between normal wages, or a get-rich-quick scheme, including buying into an asset at the “right” time. There is always the option of marrying into wealth, but for most, that’s even less likely than winning the lottery.
So why are stock markets and their ilk poor routes to quick riches? To see why, we first have to understand the actual purpose of financial markets. People - most frequently high net-worth individuals and institutional investors - trade financial assets for two reasons.
First, as a way of managing risk. Bill Gates is super rich from the Microsoft shares that he owns, but if Microsoft crashes, so too will his portfolio. Therefore, it makes sense for him to sell Microsoft shares to, say, Elon Musk, for instance, who in turn sells Tesla shares to Bill Gates. Both are still rich, but the trade has diminished the level of risk that each faces.
Second, as a way of learning about assets’ underlying values. By trading shares, for example, and seeing how willing people are to buy and sell them at various prices, I gradually acquire information about their likely long-term value. Most markets involve useful information distributed across many traders, and the execution of trades is the only way to forcibly tease that information out so that others can benefit from it. Just think of how you behave in a jewellery market: you ask about prices, you watch others haggling, and you inspect the merchandise, before ultimately deciding what you want to buy.
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Aside from these two functions, the results of asset trades are basically zero sum, meaning that if I make lots of money, someone has to be losing lots of money. Equivalently, it is impossible for everyone to get rich quickly. Financial markets do not create wealth out of nothing; they exist to help people diversify their portfolios and to learn about new assets.
OK - so how do you make sure that you are one of the ones that makes lots of money quickly, rather than one of the ones that loses lots of money? Unfortunately, unless you are willing to break the law by committing insider trading, or by defrauding people, then there is no way to make sure that you are one of the get-rich-quick minority. You have to be “lucky”, which, by definition, is not something you can systematically work toward.
But what about your friend who brought that condominium that has now tripled in value, or the one who purchased Bitcoin at the start of 2016, and is now a millionaire? Well, for the most part, they were just plain lucky. Alternatively, you are only hearing about their successful investments, and haven’t heard about the ones that tanked and are now worthless, just like your friend on Instagram who posts pictures of all the nice meals that they prepare, while refraining from sharing pictures of the failures.
Unfortunately, it’s not enough to be lucky in asset prices; you also have to be lucky to avoid being conned. Many people’s livelihood depends upon tricking unsuspecting non-specialist investors into parting with their life savings in the pursuit of quick returns. That’s one of the reasons that Facebook recently banned Bitcoin advertisements.
How do you avoid being conned? The most important step is acknowledging that getting rich quickly is not a realistic option for normal people. When you see a genuine financial consultant, rather than a conman, their opening speech will probably be about how to plan to make a safe investment for the future, corresponding to an annual rate of return of around 5 per cent. This isn’t because they lack knowledge or marketing nous - it’s because they are telling you the truth, no matter how unsatisfying.
Omar Al-Ubaydli (@omareconomics) is a researcher at Derasat, Bahrain.
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Paltan
Producer: JP Films, Zee Studios
Director: JP Dutta
Cast: Jackie Shroff, Sonu Sood, Arjun Rampal, Siddhanth Kapoor, Luv Sinha and Harshvardhan Rane
Rating: 2/5
THE SPECS
Engine: 3.6-litre V6
Transmission: nine-speed automatic
Power: 310hp
Torque: 366Nm
Price: Dh200,000
EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE
Edinburgh: November 4 (unchanged)
Bahrain: November 15 (from September 15); second daily service from January 1
Kuwait: November 15 (from September 16)
Mumbai: January 1 (from October 27)
Ahmedabad: January 1 (from October 27)
Colombo: January 2 (from January 1)
Muscat: March 1 (from December 1)
Lyon: March 1 (from December 1)
Bologna: March 1 (from December 1)
Source: Emirates
The specs
Engine: 3.8-litre, twin-turbo V8
Transmission: eight-speed automatic
Power: 582bhp
Torque: 730Nm
Price: Dh649,000
On sale: now
The biog
From: Ras Al Khaimah
Age: 50
Profession: Electronic engineer, worked with Etisalat for the past 20 years
Hobbies: 'Anything that involves exploration, hunting, fishing, mountaineering, the sea, hiking, scuba diving, and adventure sports'
Favourite quote: 'Life is so simple, enjoy it'
Final round
25 under - Antoine Rozner (FRA)
23 - Francesco Laporta (ITA), Mike Lorenzo-Vera (FRA), Andy Sullivan (ENG), Matt Wallace (ENG)
21 - Grant Forrest (SCO)
20 - Ross Fisher (ENG)
19 - Steven Brown (ENG), Joakim Lagergren (SWE), Niklas Lemke (SWE), Marc Warren (SCO), Bernd Wiesberger (AUT)
If you go...
Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.
Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50
COMPANY PROFILE
Name: SmartCrowd
Started: 2018
Founder: Siddiq Farid and Musfique Ahmed
Based: Dubai
Sector: FinTech / PropTech
Initial investment: $650,000
Current number of staff: 35
Investment stage: Series A
Investors: Various institutional investors and notable angel investors (500 MENA, Shurooq, Mada, Seedstar, Tricap)
Tips for taking the metro
- set out well ahead of time
- make sure you have at least Dh15 on you Nol card, as there could be big queues for top-up machines
- enter the right cabin. The train may be too busy to move between carriages once you're on
- don't carry too much luggage and tuck it under a seat to make room for fellow passengers
UAE Team Emirates
Valerio Conti (ITA)
Alessandro Covi (ITA)
Joe Dombrowski (USA)
Davide Formolo (ITA)
Fernando Gaviria (COL)
Sebastian Molano (COL)
Maximiliano Richeze (ARG)
Diego Ulissi (ITAS)
The line up
Friday: Giggs, Sho Madjozi and Masego
Saturday: Nas, Lion Bbae, Roxanne Shante and DaniLeigh
Sole DXB runs from December 6 to 8 at Dubai Design District. Weekend pass is Dh295 while a one day pass is Dh195. Tickets are available from www.soledxb.com
Sarfira
Director: Sudha Kongara Prasad
Starring: Akshay Kumar, Radhika Madan, Paresh Rawal
Rating: 2/5
Company profile
Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices
Company profile
Company name: Hakbah
Started: 2018
Founder: Naif AbuSaida
Based: Saudi Arabia
Sector: FinTech
Current number of staff: 22
Initial investment: $200,000
Investment stage: pre-Series A
Investors: Global Ventures and Aditum Investment Management
Off-roading in the UAE: How to checklist
The Library: A Catalogue of Wonders
Stuart Kells, Counterpoint Press
Indoor cricket in a nutshell
Indoor Cricket World Cup - Sep 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
COPA DEL REY
Semi-final, first leg
Barcelona 1 (Malcom 57')
Real Madrid (Vazquez 6')
Second leg, February 27