He who controls others may be powerful, but he who has mastered himself is mightier still.” ― Lao Tzu

If you are one of the lucky ones you will have been taught this skill as a kid by your parents, but as will all know implementing skills in the real world in real life situations can often be a lot harder than it should be. Learning self control is a critical component in all aspects of adult life not just investing, whether it be to do with alcohol, drugs, gambling all of life distractions that manage to capture so many innocent lives on a daily basis. We are all probably more wiser than ever before (Well we should be!!). We are lucky enough to be part of a generation that have witnessed and suffered the consequences of poor self control coupled with greed and access to cheap credit first hand in many cases.

Unfortunately human psychology and the power of greed create a platform for history to repeat itself time and time again, add to this an attitude of ‘This Time Its Different’ and we will be the victims this time around. While I have managed to paint a pretty dull view of what’s in store, I think its important to recognise human psychology and be aware of it when making important investing and financial decisions. One of the best life lessons that I have been taught growing up which is probably more applicable now in life when you have your own responsibilities and bills to pay ‘Don’t spend what you don’t have’. If you stick by this rule you will never go too far wrong.

Lets skip back a few years when you were in secondary school, what did the term ‘Credit’ mean to you apart from the thing you used to buy to top up your mobile phone?. It wouldn’t have registered too many alarm bells and you have had little or no meaning of its consequences. However that is all likely to change when you step foot through the doors of college, and during freshers week you have what you think is free money being thrown at you. At the time it seems too good to be true, in reality what teenager is going to turn their nose up to a €600 overdraft which registers as a FREE €600. However the reality of the situation will hit home very quickly when the week of fun is over and the €600 in scattered across your local bars and nightclubs, while the legacy of the money will torment you for years to come. It’s then and only then that you wish you had read the terms and conditions. Nobody informed you that when you don’t pay the overdraft amount back within a certain time period that it gets bigger and bigger and there is a thing called interest that will become your worst nightmare and if you are really unlucky you will get hit with surcharge interest.

While in some cases overdrafts are necessary , I would advise using them only as a last resort. Although it can be very easy to purchase an item on credit either through an overdraft or Credit card, it is usually better to wait until you have the cash saved up if that is possible. Do you really want to be pay interest on a new pair of jeans, what originally looked like good value could easily end up costing you a fortune.

You might wonder how this has any interest or relevance to a ‘Young Investor’ but let me bridge that gap for you, if you decide that you want to play around with the markets, start buying a few stocks and shares that you have heard about, get that piggy bank growing the same temptations are going to be present the only difference being that they are going to be a lot more costly if you get it wrong, and lets be honest unless you are a Warren Buffett you’re going to make some mistakes starting off. While young adults used to be happy with a savings/ deposit account on the side whether it was saving for a holiday, your first car or maybe even a deposit for your first home, the 4/5% interest rates no longer exist, you would be lucky to get 1% and lets not forget DIRT charged at 41% and inflation in around the 1% level and the purchasing power of that savings account in actually getting smaller not larger.

The current economic climate is forcing young adults to move from the traditional methods of saving money. So where are these young investors putting their money? This is where its gets dangerous, typically your young investor doesn’t have enough money to go and buy enough physical shares through a stockbroker to make it worth his / her while by the time the shares are bought and the fees are charged you are left with little or nothing. In reality they are limited to a few dangerous options ‘CFD’ & ‘Speadbetting’ to name but a few. There is where self control is critically important, obviously we would all love to turn €100 in €100,000 but hopefully we are clever enough to realise that the chances of this happening a few and far between. You normally find the dangers listed in the small print at the very bottom of the page and if you find yourself reading it, usually its too late.

In conclusion, its not an easy environment for young investors or even young savers. Typically if you want to achieve the catastrophic returns that you read about you have to take massive gambles usually on very high risk products that could end up costing you a lot more than you bargained for. My advice would be to know what you are getting yourself into before you put pen to paper, while the upside is usually the heavily advertised side be very aware of the downside, and avoid taking unnecessary risks at a young age. In most cases you will have read about or witnessed first hand the effects of ‘No Self Control’ so don’t become a victim because the repercussions can be disastrous.