Thats a great list Brendan - and a good way of thinking about it. Why make the same mistakes as others, when you could be making a whole set of new ones, eh?
1) People get carried away by their own brilliance. So they invest a good part of their money in a new business to give them something to do. The business fails and they lose all their money.
I've seen this happen with a friend! Thankfully it didn't wipe them out but it caused unnecessary hardship. Every business success requires a healthy dose of luck and luck can't be planned for! The fact that my day-to-day isn't changing much (as I'm continuing to do the same job) is actually a great comfort for me. I liked my job because I created the role for myself by starting the company – the goal was never to try and retire early or stop doing what I do in my profession at a practitioner level.
1 B) The new business idea is so good that they borrow lots of money to invest in it and lose all their money and end up with a huge debt which they can't pay.
I've seen quite a few people do well in Silicon Valley with exits. I think its interesting (and wise) that they never fund their next idea themselves – they still reach out to private equity, venture capital and increasingly (and quietly) family offices.
1C) They buy a big property which costs more than €4m so they borrow the balance. It all goes horribly wrong.
Happened to the same friend mentioned in #1 – they are still under water although with a lovely property. I am happy in my high-density apartment in a great area of North Dublin. All my neighbours are hard working and grounded, where as my friend lives in a "ladies who lunch" area of Dublin!
2) They take a huge punt on oil or gold or a particular share because someone charismatic recommended it strongly.
I think thats just gambling, to be honest. I like Investment Trusts which long term (> 50 year histories) track records instead! I think I'd be a terrible individual stock picker myself. Too much bias – especially to tech stocks, the only thing I know anything about.
3) They fall victim to scammers who get them to invest in some great scheme and they lose a big chunk of their money.
I've read the more university educated you are, the more susceptible you are to getting scammed. i.e., its people who think they are smart enough to spot a scam are the very ones that don't. I think this is a worry for anyone. My way of trying to avoid it right now is to:
a] not be greedy and look for unrealistic returns, and
b] be conservative and invest in long established funds or trusts via long established brokers or platforms (such as Davy's in Ireland, for example). Even if that means slightly diminished returns or higher than average costs. Hunting for cheapest possible fees, in my opinion, opens you up to risk.
4) They gamble it away. I suspect that you are not the gambling type, but worth noting it here for completeness.
Sure all investing is gambling
But you're right, I'm not the type. The stories I've heard from friends working for bookies and software gambling companies around Dublin would make you very wary of them. The house (almost) always wins!
I think this is a point not to be overlooked. Drugs are a no for me, but I could reign in some pints a bit. So much of business ended up being "networking", which really is a code-word for sharing a business card and then boozing. One to keep an eye on, it being New Years resolution time and all
