The problems in the banking industry have led to enormous losses in share value for anyone holding Northern Rock or Bear Sterns shares. It may have been your life savings and it may have been invested in what you believed was a solid and safe investment but the value of your investment is negligable right now compared to what it was a while back. You would be rightly angry and upset. Unfortunately investing in stocks and shares is not without risk and we should all take what has happened to those small investors, who did invest their life savings in these companies, as a warning. It could happen to you!

These investors were not stupid, not even ignorant. They had a misplaced belief they were doing the right thing and investing in safe and solid companies. The fact that the share values were so high a year ago shows that they were not alone in thinking that these were strong companies with good prospects. You would have found plenty of knowledgeable people saying the shares were a good buy but it is your money you are investing and only you can decide.

Let us suppose you are at a small a dinner party or a wedding reception and you are chatting to some friends and relatives. You get onto the subject of money and investing and in the course of the conversation your relative suggests a particular company he thinks you should invest in. He thinks it’s a sure thing and you could make a packet. You have a few options, what happens next?

1. You invest a little in the company and it does very well. You then proceed to kick yourself for not mortgaging your home and investing all the proceeds in the company.

2. You invest heavily. The company does really well and you are set up for life.

3. You decide not to invest and watch as the shares soar, so you kick yourself.

4. You decide not to invest and the company collapses. You are thankful that you chose not to follow the advice you were given.

5. You invest a little and the company collapses. You put it down to experience and your friend/relative is most apologetic when you next meet.

6. You invest heavily. The company collapses and you lose a lot of money on the investment. If you mortgaged the house to buy more shares it could even mean you and your family are out on the street and homeless.

Whichever scenario were to develop who should you congratulate or commiserate with- you or your relative who suggested the investment? It would make for difficult relations in the future with your relative if you had lost your house and you held them responsible.

The important point here is that they are not responsible. It doesn’t matter where the advice comes from it is ultimately you who takes the investment decision. It may be some whiz kid from a ‘Big City Firm’ or it could be a guy in a bar, it doesn’t matter. They may point you in the direction of a particular investment but it is your money and your decision.

So many people have been hoodwinked into buying investments because of a glitzy brochure or a glowing description of an investment. We hear of people giving hundreds and thousands of their hard earned savings to ‘boiler house’ investment scams. How can people fall for that?

You can bet the sales pitch will be terrific. Before you know it you will be salivating at the prospects for making a huge profit and eventually you will be asked to transfer the funds — your money – to the company for investment. That should be the point where anybody gets a bit scared. This sales person has phoned you up, completely out of the blue, and offered you a ‘superb’ investment opportunity. Why? Don’t they have any previous investors, business contacts or friends they would rather share this information with? How come they chose you?

You should always be suspicious of unexpected investment advice, including any from me. Nobody knows the future and even the most careful and knowledgeable investment expert is only speculating about what the future might hold for a company and it’s likelihood of success. Ultimately, it is a gamble with your money. The risks for some investments will be fairly low but with others the risks are significantly higher and with some the risks are huge. When a guy phones you out of the blue, from a company you have never had dealings with before, and he is offering you a ‘terrific’ investment opportunity you should be very wary indeed.

Unfortunately there are a lot of sharks out there. They will eat you up and spit out only the bones. They don’t care about you, they just want your money. If they leave you homeless they will not care at all. They will be enjoying their millionaire lifestyle while you sink into the gutter. So beware of scam artists, sharks and thieves. It isn’t entirely paranoid to think they are all out to get you because it’s true. They are all out to get you.

So, don’t go blaming the messenger… ALWAYS make your financial decisions yourself. Get the best advice you can. Employ the knowledge and experience of qualified financial and investment advisers but remember. The decision to invest the money is yours alone so if it all goes wrong don’t go blaming your friend, relative, colleague or financial adviser. They may have suggested the investment but it was YOU who chose to invest. Do your own research and try to establish whether the advice you have been given stands up to further examination. If you remain convinced it is a good investment then go ahead. It will be entirely your own decision that led to your great investing success or disappointing losses.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

We are told that investing in the stock market over the long term always proves to be a better investment than to invest your money in a savings account. This is not entirely true and is usually quoted by those who have a motive to encourage you to invest.

It does depend what you mean by long term. Some people would consider a couple of years a long term but the advice is generally that long term is over 5 to 10 years or more.

If we look at the London stock market over the last 10 years we discover that it hasn’t always been such a good investment. It is important to keep in mind that shares will often pay dividends so it isn’t all about capital growth but if we focus purely on capital growth we find that investing in the stock exchange can be very disappointing if you get your timing wrong.

If you had invested in the stock market, either in a fund that follows the Footsie or the All Share market in the period around 1998 to 2001 those shares would now have about the same value. Some shares will have risen well but others will have disappeared without trace. If you had invested 5 years ago you would now be sitting on a great return. You would be making something approaching double your money invested.

All this clearly demonstrates that timing is crucial. If you decide to invest at the wrong time, which is when the market is around its peak then you may find it takes years to recover, if ever. If you invest at the right time you can do very well quite quickly.

The lessons to be learned are that you should be cautious about investing if you think the market is peaking. You should be cautious if you think you will need to withdraw that investment in a hurry as it may be a very bad time for you to sell if the market has dropped.

If you think the market has bottomed that may be a good time to invest and if you can leave the money invested for an indefinite period without worrying to much about it then it may be an excellent time to invest.

The most important lesson of all is that there is no certainty about it. Investing in stocks and shares is a gamble and you should heed the advice that, ‘The Price Of A Stock May Rise Or Fall’. Be aware of it and remember that the only certain things in life are death and taxes.

You can find some good general information about stocks and shares and investing at Basic Investing

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Most commentators seem to be of the opinion that recession is around the corner and ready to pounce at any time and nearly all commentators now seem to accept that house prices are going to fall over the next twelve months. The figures suggested vary quite a lot but few dispute that they may fall around 5% or so over the year. What does that mean for the house market and what does it mean for individual house owners and buyers?

If they are right this would mean that anybody buying a house today for £200,000 would lose £10,000 by 2009. This equates to about £192 per week which is about the same amount it would cost to rent the same house and leave any money you have in the bank earning some interest.

Buying a house is not usually done as an investment alone. We all have to live somewhere and we like the idea of owning our own property but when it is costing so much you have to wonder if there is any point in doing so. If the downturn in house prices were to only last for 12 months and then turn around and prices start to rise again then the losses may soon be recouped but we have no idea if this might be the case or not.

Confidence in the future seems to be fairly low at the moment. The credit crunch and the US mortgage problems continue, banks are reporting ridiculous amounts lost in poor lending deals and people are starting to tighten their belts. Everything suggests that the times of spending and borrowing excess are over. Things could get difficult for many of us over the coming months and it could even be for some years so it is now more urgent than ever that people reduce their spending, reduce their debts and batten down the hatches for the coming financial storm ahead.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)