When Murray Carlson spoke to our class last week, he asked us to remember one of three things about finance. One of them was this: financial markets allow you to move value through time. He had a great example that had to do with receiving guaranteed money in the future, and transferring that value to the present.
When I think of this aspect of finance, I think of saving for retirement. Saving is giving up a portion of your current wealth so that you may use it in the future. I’ve always thought of most types of investments as a type of savings. But the more I think about the way many people invest their money, the less I think of it as savings and the more I think of it as gambling.
When I see article after article detailing how you should still buy gold or that copper is the next metal to skyrocket, I realize that many people aren’t looking to transfer value through time in financial markets. They’re looking to multiply value quickly. That’s why business articles talk about dramatic short-term changes in financial markets, because people are interested in the short-term.
I don’t have any specific article to link to; this was just a thought of mine.
Are financial markets the wrong tool for the job of quickly multiplying wealth? Maybe lotteries are more suitable.
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