You are wealthy when the money you have invested is giving you enough money to pay for your monthly expenses. Responsible investment guidance was clear until the end of 2018. Now, much of that guidance has been proven not to work, and must be revised.
Before November 2018, there was near unanimous agreement that the most secure investments on our planet were the treasury bills of governments that respected individual property rights. Therefore, every person on earth with a retirement savings and/or pension plan, likely had much of it invested in such treasury bills.
In October 2018, our Government passed a law to confiscate a significant amount of our collective retirement savings and pensions. There was no opportunity for the vast majority of investors to be heard. The financial institutions that managed our investments appeared to be politically compromised. They apparently stopped acting in the best financial interests of investors, and instead appeared to support grand larceny, by allowing the confiscation of our money without our consent.
Confidence in the Government’s ability to properly regulate private investment companies in Barbados was already shaken by the Trade Confirmers and CLICO scandals. However, the confiscation of our retirement savings and pensions was a warning for us to seek better investment guidance. That is the focus of the remainder of this article.
Steps to Investing
To put investing for wealth in context, consider a mortgage. Each of us may deposit money in our bank account. The bank pools this money and offers a family a 30-year mortgage of say $300,000. The family must repay the $300,000 of our money, plus interest of about $400,000 for a total repayment of about $700,000.
What we get back is essentially the $300,000 we invested. The bank keeps the $400,000 interest payment and gets wealthy. You receive whatever you put in and get to live hand-to-mouth. Do not worry, most of us are in the same stupid boat. So what can we do about it?
Deciding to get out of the boat is the first step. Avoid paying interest is the second and making wise investments is the third. To demonstrate that you have taken the first step, and to prepare you for the third, start to freely invest in others.
There are several Barbadian products that are of an international standard. We can facilitate them getting global recognition if we all agreed to promote, at the same time, one product on our social media sites each week. Why should we unselfishly promote others’ products? Because we would want others to unselfishly promote our products.
The second step is to avoid paying interest. Credit cards should be paid in full or not used. Potential homeowners can avoid mortgage interest payments by working together. For example, 100 families can form a company to construct 100 starter houses for themselves, by paying the company $2,000 each month for 8 years, instead of paying the bank $2,000 for 30 years.
Each 3-bedroom, 2-bathroom house can be constructed for under $200,000, and within six months. To reduce defaulting risks, each participating family should have already secured their land. This risk can also be managed by allowing those who have secured their land to have their houses constructed first.
The final step is to make wise investments. You are likely to get a faster return on your investment if you pooled it with others. For example, 100 people can invest $1,000 each to manage an event. To protect your investment, the event should be cancelled if it cannot attract enough participants to make it profitable.
Losing It All
Can you lose your entire investment in such initiatives? Yes. If the person managing the business intends to steal your money, they can easily do so. The risk of losing your money in this manner is significantly reduced by investigating the professional reputation and personal integrity of the persons managing the investments. In Barbados, the pool of trustworthy managers has been muddied considerably, so that selecting a competent and honest person is like a lottery.
Previously, trusting a politician, lawyer, banker, professional, or senior manager was automatic. However, politicians regularly accuse each other of gross corruption, lawyers are commonly accused of misappropriating their client’s money, and many managers seemingly received unmerited promotions for political reasons. Therefore, the risk of selecting an unqualified person is unacceptably high. Tragically, the risk of overlooking a highly qualified person is even higher.
Political operatives normally try to damage the good professional and personal reputations of our most accomplished citizens, if they deem them threats to their political party. They have also interpreted their instructions to mean that the national economy must be reserved for supporters of the political party they worship. These irresponsible actions can sabotage promising wealth initiatives that can lift many out of poverty. Their political masters can change this divisive and corrupting system any time they wish by issuing new instructions, but they never do.
Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at [email protected]