In the second part of this article, I advised that you should not put your money in any activity you cannot identify or/and understand how money is used to generate revenue or income. This is what separates gamblers from investors.
Investors always want to know and will, to a large extent, ascertain how an activity uses money to generate revenue and profit from which they will earn return on their investment. Gamblers do not. Now, while there are professional gamblers, people who have adopted gambling as work and means of income and do so with full knowledge of the losses they can suffer, there are also people who are not professional gamblers but do gamble. These later groups of gamblers are people who gamble without knowing they are gambling. Instead they thought they were investing.
Consider the example of the nine people that lost £300,000 to Key Coin Assets Ltd, the crypto trading firm closed by the U.K authorities, which I referred to in the previous article. The company promised returns of up to 100% to investors. When an investor is offered such a promise, he/she will ask, “How are you going to generate this return? What are you going to trade and how will you do the trading so that you can earn enough to be able to deliver the 100% returns promised to investors? And even when the company is able to provide convincing answers to these questions, the investor will ask for a history of performance either from the company or from companies in the industry the company belongs to. The investor will also want to know how and where he can seek redress in case the company fails on his promise, such that he does not lose his/her money. Though an investor is seeking returns, he does not want to lose his/her money. In other words, and as I mentioned some weeks back, safety of money is more important to the investor than returns.
The nine people and possibly many others who lost money to Key Coin Assets Ltd. would not have given their money to the firm if they had asked these kinds of questions and confirmed the answers from knowledgeable third parties. Like these nine people, many people are gambling with their money with the belief they are investing. Remember, any activity that is not tied to production of goods and services is gambling. It is expedient that you avoid such activities so that you don’t suffer setbacks that will prolong your wealth building journey.