If you are an aficionado of jewellery, there is nothing quite as enticing as seeing artfully crafted golden trinkets, inlaid with precious stones, in a shop window. As the saying goes, “A diamond is a girl’s best friend,” and many women would love to deepen this particular bond of friendship!

In the world of investing, it is also easy to become enthralled by the glitter of an investment that promises to transform your fortunes by making you very wealthy. As you struggle along trying to make ends meet, the thought of being able to live more abundantly can be very appealing indeed.

An unwitting window-shopper is often tempted to pay large sums to acquire a beautiful new piece of gold jewellery. An inexperienced investor, lured with thoughts of getting wealthy from a seemingly attractive investment option, can similarly be enticed into making inappropriate financial decisions.

In The Merchant of Venice, Shakespeare opined, “All that glitters is not gold.” This quote cautions you not to be swayed by external features when determining the worth of a person or an item. The same holds true for many investments, as you need to look beyond the surface to verify their real value.

HAS THE HERD GONE THROUGH THE GATE?

One reason why an investment may attract new investors is that they hear exciting reports of its incredible performance in past trading activities. Many persons never learn about an investment until they see the headlines recounting how much profit it has already made for existing investors.

This is when the concept of the investing herd takes effect, whereby people eagerly rush to buy into the investment. This increased demand usually leads to a temporary rise in the value, until many of the early investors sell their holdings and the inevitable decline in price rapidly follows.

Just like raw gold which may look dull and insignificant before being processed, a truly worthwhile investment may not look attractive at first sight. Smart investing strategies involve thinking ahead of the crowd and seeking out value opportunities before they become popular.

To avoid the stampede of the herd, you cannot get involved with an investment decision solely on its present achievements. To find value investments you need to research trends in the business and investing world, and learn how to assess an investment’s growth prospects before they occur.

DO YOU WANT TO LIVE ON EASY STREET?

Another attribute that usually steers novices towards an investment is the guarantee of immediate returns. Many people are tempted to get involved with ventures that promote fast turnaround of money with little personal effort required, thinking that these options are heaven-sent opportunities.

For example, there are some direct-selling business ventures that claim to supply large income to persons who find a handful of friends to join up. With the assurance that you just need to share the idea to make money, these ventures appeal to those who really don’t want to work for their riches.

While you can simply buy gold in a store or trade the commodity in the financial markets, don’t forget that it takes considerable effort to initially mine the ore from the earth. There are no shortcuts to creating wealth; be prepared to labour both hard and smart to obtain your reward.

To earn sustainable profits from a business, you must be willing to supply something of value to those who are willing to pay you for your efforts. To make lasting returns on your investments, you need to become skilled in wise investing techniques and pay close attention to your portfolio.

IS IT REAL OR JUST WISHFUL THINKING?

The desire to gain wealth without working for it can sometimes bring out the worst traits in people. Throughout the centuries, con artists have devised both plausible and highly impractical ventures that purport to offer fantastic financial gains to many unsuspecting investors.

One common trait of these elaborate schemes is that they trick the investors into believing that there is credible evidence to support their high returns. They may give statistical proof or provide glowing testimonies from others which seem to verify their legitimacy, and so lure people into their traps.

When mining gold, various minerals such as silica or pyrite are often mistaken for gold because they appear to be shiny rocks. The discovery of fool’s gold has deceived many prospectors into thinking that they have secured their treasure, and they foolishly begin sharing news of their ‘good fortune’ with others.

Profiting from investing is not a spectator sport; it is very rare for people to create true wealth while sitting on the sidelines. To differentiate a profitable venture from a swindler’s invention, you need to understand the mechanics behind the investment and be actively involved in the process.

So when you need to make a decision about investing your money or your time in an opportunity, remember that attractive outward attributes can be deceptive. Do your due diligence to find out what is required to generate wealth from the investment, and be prepared to work for your returns.

Copyright © 2015 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, March 19, 2015

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl