Making Smart Investment Decisions: What We Can Learn from History

When it comes to investing, many of us have been taught to rely on tried-and-true methods, like buying stocks or holding onto them for the long term. These strategies have been around for a while, and they’re often seen as the safest bets. But history has shown us that sometimes, sticking too closely to conventional wisdom can lead to missed opportunities or, worse, financial losses. Let’s take a closer look at some lessons from history and how they apply to making smarter investment choices today.

COVID-19: March 2020 and the Market Crash

Think back to March 2020, when the COVID-19 pandemic first hit. The stock market took a nosedive, and panic spread like wildfire. Many investors who followed traditional advice saw their portfolios shrink overnight. The conventional wisdom was to stay the course, ride out the storm, and hope for a recovery. And while this worked for some, others who were more flexible and open-minded found ways to protect their investments or even make money during the downturn.

This moment in history reminds us that no investment strategy is foolproof. The world is unpredictable, and markets can be volatile. Being willing to adapt and consider alternative strategies can make all the difference. It’s a reminder that sticking too rigidly to one approach, just because it’s the norm, might not always be the best path forward.

John Harrison and Long-Term Investments

Now, let’s go back even further in time to the 1700s. There was a man named John Harrison, a self-taught clockmaker, who invented something called the marine chronometer. This device solved a huge problem—how to determine longitude at sea, which was crucial for safe navigation. But despite its success, the scientific community of the time resisted his invention. They were set in their ways, preferring to use the methods they already knew, even though they weren’t as effective.

What does this have to do with investing? Well, Harrison’s story is a great example of how sometimes, the best solutions are overlooked because they don’t fit with what everyone else is doing. In the investment world, this is similar to long-term investing. It’s a strategy that isn’t always popular in a fast-paced market, but when done right, it can yield significant rewards. Just as Harrison’s invention eventually changed the world, smart long-term investments can lead to substantial growth, even if they require patience and the willingness to go against the grain.

Ignaz Semmelweis and Managing Risk

Another historical figure we can learn from is Ignaz Semmelweis, a doctor who discovered that simply washing hands could prevent deadly infections in hospitals. This might seem obvious today, but back then, his ideas were ignored and even ridiculed by the medical community because they didn’t fit with the accepted theories of the time. It wasn’t until years later that his methods were finally adopted, saving countless lives.

In the financial world, managing risk is like washing your hands. It’s a simple, effective practice, but it’s often overlooked or underestimated. Many people think of risk management as something that’s only necessary in extreme situations, but in reality, it should be a part of every investment decision. Just like ignoring handwashing can lead to disaster, ignoring risk can lead to significant financial losses.

Using Options on FX, Equity and Bonds: A Safe Way to Make Money

Now, let’s talk about something that might surprise you: options on FX (foreign exchange), equity and bonds. These are often seen as risky, complicated investments that are best left to the experts. But here’s the truth: when used correctly, options can be a safer way to make money than traditional stock buying.

Think about it. We’ve all heard stories of big companies like Enron, WorldCom, and Lehman Brothers that looked rock solid—until they weren’t. People who invested in these companies lost everything when they collapsed. But with options, you have more control. You can limit your losses and even profit when the market drops. It’s a way to take advantage of opportunities without putting all your money on the line.

This doesn’t mean that options are risk-free—nothing in investing is. But they offer a level of flexibility and security that traditional stock buying doesn’t. It’s just like how Harrison’s chronometer was a better way to navigate, or how Semmelweis’s handwashing was a better way to prevent infection. Sometimes, the less obvious choice is the smarter, safer one.

Conclusion: Don’t Be Afraid to Think Differently

The key takeaway here is simple: don’t be afraid to think differently. Just because something is widely accepted doesn’t mean it’s the best option for you. History is full of examples of people who succeeded by going against the grain and finding new solutions to old problems. Whether it’s through long-term investments, managing risk, or exploring options, being open to alternative strategies can help you protect and grow your wealth.

Investing is about making informed decisions and being adaptable. By learning from the past and considering all your options, you can confidently navigate the financial world and come out ahead, even when others are stuck in outdated ways of thinking.