And the correct questions to ask
Recently I received a forwarded message about an investment product:
First thing to note is that this is a Fintech Product. And looking through the website, it is a crytocurrency trading algo. There are a great many investments free from speculation risk, e.g. FD, bonds… Fintech and Crypto are typically at the bottom of the list.
Marketers understand investors’ common question is whether this investment is speculation or not? And the answer according to marketers is always no, this is not a speculative product. The correct question to ask is then: Where do this product fall on the overall Investment Product risk scale?
Second thing to note is the claim of: “Passive investment stream”. Most people’s ultimate dream is a passive income stream. This is because they hate their job or don’t have any love for it. That is why they want to have a ‘passive income stream’ so that they can replace their ‘active income stream’. This is the dream.
However, most people’s idea of a ‘passive’ income stream means ‘zero volatility’, or the income must be consistent. And the ‘passive’ income must not need any maintenance or monitoring. Means it run by itself. There is no such thing in the world. There is FD but not everyone can accumulate a mountain of cash to live off FD interest for the rest of their life. An income stream needs to be maintained, monitored, and more than anything else, will follow the volatility/reward spectrum. If a ‘passive’ income stream is ‘high’, it will likely be volatile, inconsistent and subject to many many challengers (If there is money to be made, no one will leave it alone).
Marketers understand investors’ common dream of a passive income stream. And the answer according to marketers is always yes, this is a passive income stream. The correct question to ask is then: What is the sustainable income record for this product for the last 10~20 years?
A few more marketing technobabble before we close:
“Bring great value to yourself and our society” – most of us don’t really understand the productivity improvements of Fintech giving to society. Most of us just see great ‘monetary’ value to ourselves. It’s just our greed talking. If we really understood the great value to society, we will also understand the value of a moderate, un-excessive return investment product. If we got an ultra high return, someone somewhere is being screwed.
“Take control of your finance life” – Most of us are lazy when it comes to finance. In fact, for most of us, it is out of control, cruise control, or no control. So this seems like good advice. At the very least, it is attractive because it seems like surfing to this website is the feel good indication that we seem to be doing something… at least.
“Sow your seeds” – This is quite ingenius actually. Most of us associate sow and seeds with a tree, an actual living tree. So any investment asking you to ‘sow your seeds’ feels like a solid description of growing something… of course we conveniently forget the watering, planting, trimming, de-pesting, fertilising that goes with a real tree, because… passive, right?
A very good description of Fintech. Also not saying anything at all. Just technology + automation = un-traditional = good $$$
“Intelligent Calculation System” – Most of us can’t reverse engineer an electrical failure to first check on the lamp, then the starter, then the ballast, then the wiring, then the switch, then the fuse, then the ELCB… So it follows that most of us can’t reverse engineer an investment business model to its source and core. So the usual marketing thing to do is to give it a name – ICS, ERAA, etc. Anyway it is a blackbox, so my job is only to make it sound cool and professional.
This is not to hit on this particular investment product. Just an awareness of where our buttons are in regards to investment market-speak. Don’t ask the usual questions, you will only get back the answers you want to hear. Ask the right questions, as this will lead you to a solid, sustainable investment.