I am a fan of George Clooney. The latest movie that he acted in is called Money Monster.
This article aims to share what I have learnt from watching the movie– from the perspective of someone who love investing.
Before I share with you the lessons that I learnt, I need to give you some background story.
It is a movie about Lee Gates being the star of a reality show called Money Monster.
What Lee does on a regular basis is to hype up investment ideas to viewers– for entertainment purposes– without researching too much about the authenticity of the ideas they presented.
What happened was that during one of the Money Monster episode, Lee was talking about a company called IBIS– which does high-frequency trading for stocks on behalf of their clients.
Lee was promoting IBIS stock during the episode and describing it as the stock to buy. It was due to stellar track records of the company in terms of profitability for the past few years. Lee also described IBIS as a stock that is “safer and more stable than a savings deposit”.
Unfortunately, IBIS stock crashed in the following weeks after Lee’s recommendation because the company lost $800 Million due to an “unknown glitch”.
Turns out it was due to a fraud by its CEO.
One of the shareholders that lost money was called Kyle and he came on to Lee’s Money Monster show to take Lee hostage.
In the end, Kyle is shot dead by New York Police Department (NYPD) and Lee was freed.
The motivation behind Kyle investment in IBIS was that Kyle wanted to be richer– as he felt the amount of money he has at that time is not enough to support his girlfriend and child.
So on the recommendation by Lee, during a Money Monster episode, Kyle took $60,000– which is all the couple had– to invest in IBIS.
Here Are Some Lessons I Learnt:
Lee is an accomplished person in terms of his financials– because he is a millionaire– but he is divorced, 3 times.
Kyle, on the other hand, is a truck driver that earns $14/hour and is struggling to survive and is desperate to earn lots of money.
There Are Lessons To Be Learnt From Both Characters
Being a rich man, money is not a problem– he has plenty!
Meaningful relationships, on the other hand, he has little.
I think there is a limit to how much money is needed to have a good and comfortable living.
Lee focuses too much on earning money and forgot the one important thing in life, which is having and maintaining good relationships with people that matter most– his family.
He does not have balance in his life.
He is a desperate man.
He reads investing books during his free time thinking that he is smart and that he knows how to profit from investing in stocks– but he invests in IBIS taking the advice of a Television Reality Show Host (Lee Gates)– and he lost money because of it.
One of the thing he missed out is that he forgot to invest in his knowledge first.
He does not understand what he is doing and he placed too much money in one stock.
Putting $60,000– which is all he had– in one stock is simply a result of not having a proper portfolio management and that increases the firm-specific risk of the investment massively.
That resulted in him losing most of his money through one single uncontrollable action of an individual in the firm– the CEO committing fraud– and there is nothing Kyle can do about it!
IBIS CEO has a good track record but no one knows why human greed decided to take over him– and that resulted in him breaching the trust of his clients– by committing fraud.
The Thing About Finance Or Investing Is That It Is Not Just About Money, It Is About Life
People earn money to have a good life, to be able to have the freedom to do what they want to do– to be able to provide a good life for their family.
That is why people study and work hard, compete hard in life to be able to reach to the top– to get out of the rat race— and achieve the so-called “financial freedom“. Don’t you too?
That was all Kyle wanted, he wanted to have more money to give a better life to his girlfriend and his child.
But ultimately this leads to the question of, “what is the meaning of life?”, “what is the life that is worth living for you?” and “What does money means to you?”
I feel as a human, we would want to earn as much money as we possibly could but far too many people are sacrificing more important things for money– important things such as health and relationship with people that matters.
Far too often people take unnecessary risks instead of going through the traditional way of working hard and earn a decent living over time.
I am sure Kyle girlfriend would not mind Kyle not earning as much money but instead, he works hard–rather than trying to get rich quick by investing in stocks.
To Conclude, Here Are Some Practical Takeaways For Investors:
1) Never put all your money in one investment– always diversify to reduce your firm-specific risk.
2) Never invest in a stock because of an investment advice by ANYONE. Always do your own due diligence because after all it is your own hard earned money.
3) High-frequency trading uses algorithms but it is never perfect. Be it due to a black swan event that nobody predicted or due to an internal fraud. After all, the biggest investing risk is still human behaviour (both from the management side as well as from our side)
4) Invest with the mindset not to earn a lot of money but instead, to not lose money. That means protecting downside comes first– and the upside will take care of itself.
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Important: Please read my disclaimer.
CHRIS LEE SUSANTO
Hi, my name is Chris and I am the founder of Re-ThinkWealth. A blog that focuses on personal finance self-improvement, investments, and investor psychology.
Since early 2015, I manage money for my family and invests it in Singapore and United States equities and options achieving above market return.
I use Value Investing and Options Selling strategies used by Warren Buffett (World’s richest investor) coupled with the core theory of inversion. Inversion meaning that in every investing idea, we have to scrutinise on why it would fail.
This will result in us being more conservative, and being conservative is the key to protecting and growing wealth in the long run.
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