Barefoot Investor: Why even a little bit is a sorry joke

Cryptocurrency is a fascinating area but it’s stressful being a gambler. There is no skill involved, and the odds are stacked against you.

Barefoot Investor Scott Pape. Picture: Graeme Taylor

Last Saturday night I found myself standing alone at a bonfire party, staring thoughtfully at the flames.

A guy walked up to me awkwardly.

“Would you like a beer?” he asked.

“Well, sure!” I said.

He handed me a beer.

“Now ... can I talk to you about ... Bitcoin?”

“Oh ... kay.”

Truth is, I’ve spent a lot of time thinking about and learning about crypto, and the future of decentralised finance. It’s a fascinating area ... but I think I may have wasted my time.

That’s because all I needed to do was buy the joke crypto Dogecoin, which, at the time of writing this, has returned a staggering 8300 per cent year to date.

Let me say that again:

The best-performing cryptocurrency stretching back six years – the top dog – is Dogecoin.

Remember, Dogecoin was set up as a “piss-take” by its Aussie founder. It has zero tangible value. It is worthless.

And to prove what a “chump” I am, I wrote about the dangers of Dogecoin in this column 10 weeks ago ... and since then it has increased by 400 per cent!

Woof, woof!

So do I feel a twinge of regret for not getting in? No.

For much the same reason that I’ve never contemplated putting 1 per cent of my net worth into the pokies (“Just in case, you know, I win the jackpot”).

Here’s the point:

Life is really hard when you believe you can make a quick buck from magical dog memes.

It’s stressful being a gambler.

There is no skill involved, and the odds are stacked against you.

You see, in order to make real money you have to sell. And every man and his dog is planning to sell out of Dogecoin right at the top. Every single one of them. It’s called the “greater fool theory” (i.e. you only win when some greater fool buys in at a higher price), and history is littered with people who abruptly discovered that they in fact were the fool.

Wise old billionaire Charlie Munger advised: “The first rule of compounding is to never interrupt it unnecessarily.” In other words, you’re being tested right now. If you’re persuaded to sell your boring index funds and lie down with dogs, I can almost guarantee you’ll eventually end up with financial fleas.

Tread Your Own Path!

HOW NOT TO BUY AN ISLAND

Hi Scott,

A couple of years ago you warned retirees about investing with a company that owned Dunk Island, who were promising high returns. Well, I just read about Dunk’s repossession. You predicted this!

Mandy

Hi Mandy,

Yes, I predicted it ... and so did a lot of others in the media.

Collectively we did our best to warn people of the dangers of investing in a high-risk investment that marketed itself as a safe alternative to bank term deposits.

Look, this is my seventeenth year of writing this column, and over that time I’ve seen plenty of outfits come and go promising high returns with low risk. And every time they lure in the financially illiterate, and do a hell of a lot of damage.

Case in point: it’s been reported in the media that Pauline Hanson’s One Nation hosed $500,000 after investing with the cowboys at Mayfair.

Please expline?

Plenty of outfits come and go promising high returns with low risk. And every time do a hell of alot of damage.

HOW CAN I ESCAPE MY ABUSIVE PARTNER?

Scott,

I am 29 and living with an abusive partner. After years of disinterest, he suddenly wants to “go Barefoot” – now that I have a new job! I am wondering how I can follow my own Barefoot path and still keep money hidden away so I can escape this relationship. Perhaps I should follow your book with my partner AND open another account on the side. Any advice?

Roseanna

Hi Roseanna,

My heart goes out to you – there is no excuse for abuse.

Now, to your question: should you do the Barefoot plan with him?

Hell, yes.

In fact, I want you to take the lead on it. It is, after all, the perfect excuse to get things sorted, without him realising you’re actually plotting your escape.

So, gather up all your financial details: super, debts, savings and bills.

Whose names are they in? Who has the authority on the accounts? Is there any money owing?

Keep copies of everything.

And, most importantly, if you can, do all of this at work ... never from home.

Reason being, he may have access to your mobile, your home computer, and probably your snail mail. Worse, on some devices (like Apple) you can be tracked (via the Find My iPhone app), or he may be able to read your text messages on another Apple device (like an iPad).

Bottom line? Protect yourself.

While you’re at work and have some privacy, call the following numbers:

First, call 1800 RESPECT (1800 737 732) for free confidential information, counselling and referrals to other support services.

Second, call your bank’s hardship department (google it). Each major bank has dedicated teams set up for their customers who are experiencing family violence.

Ask them to set up an account in your name (with a separate, secure internet banking password), which will serve as your getaway fund.

Third, call the National Debt Helpline on 1800 007 007 and ask for a referral to a free financial counsellor in your area, who can work with you to not only help plot your escape but ensure you have financial security after you leave.

Finally, read Rosie’s story below.

You got this!

ALL I WANTED TO BE WAS A ‘GOOD MUM’

Dear Scott,

My husband bailed on me when my son was just 18 months old, leaving me with the most beautiful boy in the wide world but nothing much else. He grew into a teenager but by then things were not going well.

One night, I was on the floor gasping from the weight of uncertainty and crushing fear, thinking I might not be able to provide for him, or even to keep our home. All I ever really wanted to be was “a good mum” but I was flattened.

Thankfully, some dear friends gave me your book, and I read the whole thing in a day. I bawled for a good hour at “You got this”, then went back to page one and worked through it step by step. Since that time, I have set up my buckets, taken control of the mortgage, paid off my car loan (five years early) and negotiated two pay rises. Although our Splurge and Smile buckets are small, we save up for special times together and life is good. So, from the bottom of my heart, THANK YOU. Your books and advice have changed my life and my son’s life. Rosie

Hi Rosie,

You did it! You are a good mum!

You may not realise it but, to quote Paul Simon, you’ve got diamonds on the souls of your shoes.

Your struggle is a family legend that has the potential to influence your son’s life for the better.

So, over a Sunday dinner, talk about gasping on the floor, feeling totally defeated ... and, importantly, how you rose up. Refer to the struggle and the triumph over and over again.

The subtext to the story is: “We get knocked down, but we get back up again, and we win.”

That’s the stuff your son is made of ... and it’s part of his story too.

Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.