Thursday, January 27

Greed: The downfall of investment


“As long as greed is stronger than purpose, there will always be suffering”

RECENTLY I read an interesting statistic ­– Malaysians suffer losses amounting to about RM2.23 billion from scams since 2017. According to data from the police, a total of 67,552 cases were reported between 2017 till June 20 this year.

Of the total, e-commerce scams topped the chart with 23,011 cases, followed by illegal loans (21,008) and investment scams with 6,273 cases.

This is something alarming in the community. We can only have ourselves to blame for falling prey to vague or too-good-to-be-true investment schemes.

A deeper understanding of greed can help us overcome this problem. Material goods and the money we desire for is not something evil.

Wealth can bring security, independence and happiness to a certain level.

Wealth is not a bad thing, it can help us meet our basic needs as well as enjoy luxuries which make life better.

In contrast, greed is an excessive love or desire for money or any possession. Greed is not merely caring about money and possessions but caring too much about them.

The greedy person is too attached to his things and his money, or he desires more money and more things in an excessive way.

Greed has unpleasant effects on our inner emotional happiness. Let’s see how we can eliminate greed by understanding some financial behavioural concepts:

Investment is not gambling

Some people see investing as gambling, but it is not the same as gambling at a casino. In fact, real investors will tell you that there is no gamble involved in investment.

Investing gives you ownership of an asset with potential to increase in value over time. In most cases, this asset will provide some sort of income while you wait.

This could be in the form of stock dividends, bond interest, or even rental income.

As an investor, one of the best things you can do for yourself is to put your money in legitimate investments that will help produce well-deserved long-term results.


Understanding your risk profile

Before you consider investing in any financial instrument, you must know how much risk you’re ready to take.

Risk profiling is important for determining a proper investment and asset allocation for a portfolio.

Every single person has a different risk profile as the risk appetite depends on psychological factors, loss bearing capacity, investor’s age, income and expenses.

Your risk profile may change over time, depending on changes in your life cycle. It could also be due to your income changes or you may have new goals.

Hence, what was right and worked for you at a younger age may not be the same when you turn age 60 but knowing your current risk profile is very important. Remember, the greater the promised investment returns, the higher the risk.


Patience is the secret to wealth building

People often look for quick ways to accumulate wealth but getting wealthy quickly is rare. It generally involves taking on large risks or getting really lucky.

Many of these people lose a lot of money by succumbing to greed when they take on too much risk.

If you come across an easy way to get rich fast, chances are it’s a scam. Impatience develops greed and destroys wealth. Patience teaches you discipline and focus. Remember, wealth building is like a marathon not a sprint.


FOMO: Fear of missing out

People are generally worried about missing out on an opportunity, perhaps for “the next big thing”.

It is human nature to regret missing out on a good thing. It’s difficult to hear of others making huge amount of returns in short periods of time.

This FOMO can be overpowering, but resisting FOMO is important to not get trapped into a scam. It is completely aligned with Warren Buffett’s advice to “be greedy when others are fearful, and fearful when others are greedy.”

General awareness about scams is definitely on the rise, which helps us be more wary and careful.

There are many reasons why we fall for investment scams. As we understand and realise these factors, we are less likely to fall prey to investment scamsters.

Your money, your responsibility!


Gunaseelan Kannan, CFP, a Financial Adviser Representative by Bank Negara Malaysia and a Licensed Financial Planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology. He also lectures on accounting, finance and business fields in Asia Pacific University of Technology and Innovation (APU). He is the Winner of Malaysian Financial Planner of the Year 2020, from Financial Planning Association of Malaysia. Email to