The dictionary meaning of ‘fast’ and ‘quick’ may be the same. But in “my” financial parlance they are totally different. In fact, so different that it becomes a matter of life and death – or a matter of poverty or prosperity – if you do not appreciate the distinction.
For example, Honda City runs faster than Hyundai Eon; Mercedes runs faster than Honda City; and Ferrari runs faster than Mercedes. In short, “fast” as per my definition is inherent in the quality of the product.
For example, bank deposits give more returns than savings account; company deposits give more returns than bank deposits; and shares give more returns than company deposits. In short, there is a product-wise grading of the returns that you can expect from different investments.
If you are planning your investments suitably to earn “faster” returns – based on your risk-taking ability – you are doing fine. No problems at all!
The problem is when people chase “quick” money.
For example, people cut lanes in their Hyundai Eon to go ahead of Honda City; Honda City breaks red signal to go ahead of Mercedes; or a Mercedes overtakes from the wrong side to go ahead of Ferrari. In short, “quick” as per my definition is the POOR and DANGEROUS quality of driving.
For example, people invest in deposits of a dubious company to earn more returns than bank deposits; they invest in shares based on ‘hot’ tips to make more money than company deposits; and they trade in futures and options to make more money than shares. This is nothing but POOR and DANGEROUS quality of investing.
As you will appreciate, poor quality of driving is too risky. You may be lucky many times for many years. But one – just one – stroke of bad luck and you may not live to tell the tale.
As you will appreciate, poor quality of investing is risky. You may get stuck in investments with high charges. You may buy illiquid investments. You may end up paying high taxes on your returns. You may buy products that are much riskier than your risk-bearing capacity.
I have always wondered, but the answer still eludes me – despite being aware of the grave risks, why are people so reckless with their driving habits? Why are people so reckless with their investing habits?
If I find the answer, I will surely share with you. But in the meantime, let me reiterate the obvious:
– Look for fast returns as per your risk-appetite and with appropriate precautions, and
– Please desist from taking shortcuts to make quick money.