The Five Laws of Gold

We live in an impatient age and when it comes to money, we want more of it now, today, not tomorrow. Whether it’s a mortgage deposit or clearing those credit cards that drain our energy long after we’ve stopped enjoying what we bought with them, the sooner the better. When it comes to investing, we want easy withdrawals and quick returns. Hence the current cryptocurrency craze. Why invest in nanotechnology or machine learning when Ethereum is locked in an endless upward spiral and Bitcoin is the gift that keeps on giving?

A century ago, the American writer George S. Classon took a different approach. In The Richest Man in Babylon, he gave the world a treasure trove—literally—of financial principles based on things that might seem old-fashioned today: prudence, prudence, and wisdom. Klasson used the sages of the ancient city of Babylon as spokespeople for his financial advice, but that advice is as relevant today as it was a century ago when the Wall Street Crash and Great Depression loomed.

Let’s take the five laws of gold as an example. If you want to put your personal finances on a solid footing, wherever you are in your life, this is for you:

Law #1: Gold comes happily and in ever-increasing quantities to anyone who puts at least one-tenth of his earnings into an estate for his future and that of his family. In other words, save 10% of your income. minimum. Save more than that if you can. And that 10% isn’t for next year’s vacation or a new car. This is for the long term. Your 10% could include your pension contributions, ISAs, premium bonds or any type of high interest/restricted access savings account. OK, interest rates for savers are at historic lows now, but who knows where they’ll be in five or ten years? And compound interest means your savings will grow faster than you think.

Law #2: Gold works diligently and happily for the wise owner who finds profitable employment for it. So if you want to invest instead of saving, do it wisely. No cryptocurrencies or pyramid schemes. We focus on the words “profitable” and “busy”. Make your money work for you, but remember that the best you can hope for this side of the rainbow is consistent returns over the long term, not lottery winnings. In practice, this probably means shares in established companies offering a regular dividend and a steady upward trend in share price. You can invest directly or through a fund manager in the form of unit trusts, but before you part with a penny, see Laws 3, 4 and 5…

Law No. 3: Gold clings to the protection of the prudent owner who invests it according to the advice of those who handle it wisely. Before taking any action, speak with a qualified, experienced financial advisor. If you don’t know one, do some research. Check them out online. What expertise do they have? What customers? Read the reviews. Call them first and find out what they can offer, then decide if a face-to-face meeting will work. See their commission arrangements. Are they independent or tied to a specific company under contract to promote that company’s financial products? A decent financial advisor will encourage you to secure the basics: a pension, life insurance, a place to live, before guiding you toward investing in emerging markets and space travel. When you’re satisfied you’ve found an advisor you can trust, listen to them. Trust their advice. But review your relationship with them at regular intervals, say annually, and if you’re not happy, look elsewhere. Chances are, if your judgment was right in the first place, you’ll stick with the same advisor for many years to come.

Law #4: Gold eludes one who invests it in a business or purpose with which he is not familiar or which is not approved by the specialists in it. If you have deep knowledge of food retail, by all means invest in the supermarket chain that is increasing market share. Similarly, if you work for a company that has an employee share scheme, it makes sense to take advantage of it if you are sure that your company has good prospects. But you should never invest in a market or financial product that you don’t understand (remember the Crash!) or can’t fully research. If you’re tempted to try your hand at forex or options trading and you have a financial advisor, talk to them first. If they are not aware, ask them to refer you to someone who is. Best of all, avoid anything you’re not sure about, no matter how great the potential return.

Law No. 5: Gold flees from one who seeks impossible gains, or who follows the tempting advice of swindlers and schemers, or who trusts in his own inexperience. Again, the fifth law follows the fourth. If you start searching the internet for financial advice and wealth building ideas, your inbox will soon be full of “scammers and schemers” promising you the land if you invest £999 in their ‘system’ of turning £1 into £ 1XXXXXX on the Chicago Mercantile Exchange. Remember, the only one making money in a gold rush is the one selling shovels. Buy the wrong shovel and you’ll quickly find yourself in debt. Not only will you be paying through the nose for a system that has no proven value; by following it you are likely to lose much more than the price you paid for it. At the very least, you should check the genuine product reviews. And never buy any system, investment vehicle or financial product from any company that is not registered by a national regulator such as the UK’s Financial Conduct Authority.