The Third Law of Gold
- Team at LSH
- Jan 18
- 4 min read
This is part 3 of the series based on the 5 Laws of Gold. Let's start with the Third Law of Gold in the "Richest Man in Babylon", with the italics from the book, and the updated words as the sub-bullet.
"Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling”.
Your money will stay and grow if you invest the money, with those who know what they are doing! Invest for the long term. Be cautious, but take calculated risks, based on good advice from people who have proven success.
Any reference to specific products in this article is for informational purposes only and does not constitute an endorsement by Little Success Habits. The links to 'The Richest Man in Babylon' or other products are not affiliate links or paid promotions. The information contained herein does not constitute the provision of investment advice.
In this post, we’ll look at taking the growth of money by using it for profitable employment (The Second Law of Gold), and associate it with the type of owner of money you tend to be.
For some, money can seem fleeting, or difficult to come by. For others, money comes steadily, and in ever-increasing amounts. For many professional athletes who make huge sums, most face financial difficulty after retirement. Why does money run from one person, and stays with another? It is interesting to understand your relationship with money. How do you treat the money you earned, saved, spent, and invested?
For example, research suggests approximately 78% of NFL players face "financial trouble within two years of leaving the game" (Hess, 2021), and "nearly 80% of pro athletes go broke after retirement" (Louis, 2024). They made millions of dollars and should be set for life! How did they lose it? There are always many reasons such as "Supporting an entourage and extended family" and "Divorce is expensive" (Louis, 2024), but also because of the type of owner for the life-changing amounts of money. By breaking the 3rd law, they effectively used and spent the money, rather than wisely investing it, allowing for increased growth. After you get it, you must keep it safe and grow it!
Are you a cautious owner of money who invests consistently and wisely? Is it important to you and your well-being? If you say ‘Money isn’t important’, well money won’t treat you as important and will run away. Or, do you spend or invest it without much consideration? A good way of seeing what type of owner you are, is whether money generally sticks around and grows for you, or not? Does the paycheck come in, and soon it's all gone? Or do you put aside money (as highlighted in 'The First Law of Gold') and when ready, seek the advice of people good with growing the money? These are good questions to consider, but you can become good with money, a cautious owner, and experience the benefits of good investments.
Money tends to remain with a careful owner and flees a careless one. The third law also emphasizes that those who seek wise advice for their investments can ensure that their capital remains and grows. While investments carry many risks, these can be reduced. Avoid risking the principal of the investment, but benefit from steady growth and potential cashflows like in real estate or stock dividends.
Especially for the bigger amounts you want to invest, get good advice. Start small, and receive support as you invest larger amounts. There are many sources of research and guidance, even if you don’t know them personally. Ask advisors or research questions like ‘What are the risks of this investment?', 'Can I get the principle or money back’, and ‘Would a wise investor advise me on this investment?’ Preserve in safety your investment, and enjoy its steady increase. Work with those who have already done well and can show you, guide, and teach you. Have you done your diligence? Have you tried to protect yourself? Do you have others giving you guidance on your investments?
Buying a house? Get in touch with people in your circle or trusted advisors. Those who know how to find a good property, assess it, and give you good advice through the buying process. Have a good realtor or agent. Buying a house is long and arduous, and with many sticky potentially expensive traps!
Buying stock? If you’re into finding the next big win investment, perhaps find or research good stock picks through investment services. For those without significant experience, individual stock picking or day trading is likely to lead to the loss of big sums of money. For example, "only 13% of day traders maintain consistent profitability over six months" (Groette, 2024).
Don’t know which mutual fund or Exchange Traded Fund (ETF) to buy? Ask not the people selling you the investment, but independents that have done well buying certain stock market indexes. For example, the Vanguard S&P 500 ETF named 'VOO' over 30 years (January 1995 to December 2024) has provided a 10.85% annualized return, when adjusted for U.S. inflation, the inflation-adjusted return was 8.13% per year (Lazy Portfolio ETF, 2024). This data is as of Dec. 31st, 2024. Note, that these are not financial recommendations, and it is important to do your research. As Brennan Schlagbaum (@budgetdog) put it, "Good investing is boring, slow, and stable". The figure below shows the growth of $1 invested into VOO (with and without the inflation adjustment), from 1995 to 2024, with the dividends reinvested. $1 invested into VOO, with reinvestment, and accounting for inflation over the last 30 years, would be worth $10.42 (Lazy Portfolio ETF, 2024).
People who are good with money and used to handling it can help you. As Dave Ramsey says, find an investment professional, “someone with the heart of a teacher” (Ramsey, 2022).
The Third Law aims to safeguard you by ensuring you seek out people to provide good guidance on your investments. By receiving sound advice on your finances and investments, you can become a more prudent owner and enjoy your wealth over time.
To your success.
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