So Many Shoes, So Little Money – Blog

Madoff Lesson

January 9th, 2009

One of the worst of the recent horrible headlines is the $50 billion dollar swindle perpetrated by Bernie Madoff. If you have not been following the saga, you should. It provides a valuable lesson about why understanding money and taking control of your finances is so important.

In a nutshell, Mr. Madoff paid early investors with money from later ones. He did this for so long, and on such a large scale, he convinced folks that whether the stock market was rising or falling they could invest with him and receive the same return – earn money on their money – without any risk.

Through understanding money, you understand the risks involved with investing. A higher return on investment almost always comes with a higher risk of losing your money. Most of us already know there is no such thing as a free lunch – or a free dinner. The same is true of investing: If something sounds too good to be true, it probably is.

Filed under: Introduction

Tags: Investing, Personal finance