I was recently asked to review the final book Jeffrey Archer is writing. While reading it, I was reminded of just how good a storyteller he is.
It also encouraged me to return to his first novel, Not a Penny More, Not a Penny Less, which was originally published in 1976.
Nearly 50 years later, the story feels surprisingly relevant.
We live in a world of artificial intelligence stocks, cryptocurrencies, investment influencers and stories of people apparently making money overnight. It has never been easier to invest, but it has also never been easier to be caught up in the excitement.
The book provides a timely reminder of what can happen when the promise of a quick return becomes more important than understanding what we are investing in.
The story behind Not a Penny More, Not a Penny Less
A warning before going any further: there are some spoilers below.
The story begins with Harvey Metcalfe, a con man who creates an oil company with a licence to explore a potential oil field in the North Sea.
Interest in the company builds and its share price rises. Metcalfe gradually sells his shares, leaving four novice investors facing significant losses when the truth emerges.
The four strangers eventually come together with one objective: to recover everything they have lost, not a penny more and not a penny less.
Although it is a work of fiction, the story contains several important lessons for anyone considering a speculative investment.
1. Only invest what you can afford to lose
The first lesson is simple.
When considering a highly speculative investment, never invest money that you cannot afford to lose.
This is particularly relevant to cryptocurrencies and other high-risk investments. The Financial Conduct Authority warns that anyone investing in crypto should be prepared to lose all the money they invest.
This does not mean that every speculative investment will fail. It means recognising the difference between investing as part of a long-term financial plan and taking a calculated gamble.
Your mortgage payment, emergency savings or retirement security should never depend on the success of one speculative idea.
2. Research, research, research
One of the greatest challenges investors face is time.
We may feel that unless we act immediately, we will miss the opportunity. The share price is rising, people are talking about it and everyone else appears to be making money.
This is the fear of missing out, or FOMO.
It can be better to miss an opportunity than to invest without doing the research.
Before investing, consider:
- What does the company actually do?
- How does it make money?
- Does it currently make a profit?
- What could cause the investment to fail?
- Is the price being driven by genuine progress or excitement?
- Where has the information come from?
- Is the person promoting it benefiting from your decision?
Research does not remove risk, but it can help you understand the risk you are taking.
3. If you do not understand it, do not invest in it
Investing does not need to be complicated.
You should be able to explain, in simple terms, what you are buying, why you are buying it and how you expect it to generate a return.
Artificial intelligence is a good example. AI may transform industries and create successful businesses, but simply including “AI” in a company’s story does not automatically make it a good investment.
The same applies to cryptocurrencies, small companies, overseas investments and new technologies.
You do not need to understand every technical detail. However, you should understand enough to identify what could go right, what could go wrong and how much you could lose.
Complex language should not be mistaken for a convincing investment case.
4. Treat investment tips with caution
In the book, the investors are encouraged by information that appears to come from someone close to the company.
This can make an opportunity feel more believable. Someone may say:
“I know somebody who works there.”
“Something big is about to be announced.”
“You need to get in before everyone else.”
Treat statements like these with extreme caution.
The information could be wrong, exaggerated or deliberately misleading. If it genuinely represents non-public, price-sensitive information, acting on it could also raise serious legal concerns. UK market abuse rules prohibit insider dealing and encouraging someone else to trade using inside information.
A genuine investment opportunity should stand up to independent research. It should not rely on a whispered tip or a promise that only a few people know what is about to happen.
5. A good outcome does not make it a good decision
The final twist in the book delivers perhaps the most important lesson.
BP discovers oil close to the area covered by the company’s licence. The shares, previously thought to be worthless, suddenly rise to a record level.
The investors appear to have been rescued by an extraordinary piece of luck.
But this does not mean their original investment decision was sensible.
This is an important distinction.
You can make a poor decision and achieve a good outcome. You can also make a well-researched and sensible decision that does not work out as expected.
We often judge decisions entirely by their results. In reality, the quality of the decision should be judged using the information available at the time.
Luck should not be confused with investment skill.
Are AI stocks and crypto always bad investments?
No.
New technologies can create opportunities, and some businesses will successfully use AI to increase productivity, reduce costs or develop new products.
The issue is not necessarily the investment itself. It is how the decision is made and how much risk is taken.
Ask yourself:
- Does this fit within my wider financial plan?
- Do I understand the investment?
- Have I researched it properly?
- Am I investing because of evidence or excitement?
- Could I cope financially and emotionally if it fell significantly?
- Am I relying on one investment to achieve my goals?
A diversified portfolio accepts that we cannot consistently predict which individual company, technology or market will deliver the best return.
The difference between investing and speculating
Investing usually involves putting money into a range of assets with the aim of achieving long-term growth or income.
Speculation focuses more heavily on predicting short-term price movements.
There is nothing automatically wrong with allocating a small amount to something speculative, provided you understand the risks and can afford the potential loss.
The danger comes when speculation is mistaken for financial planning.
A rising price does not prove that an investment is good. It simply shows that, at that moment, more people are willing to buy it.
Final thoughts
Not a Penny More, Not a Penny Less is an entertaining story, but it also provides a valuable reminder for investors.
Be cautious when an opportunity sounds too good to be true. Take your time, check the facts and do not allow the fear of missing out to make the decision for you. The FCA highlights pressure to act quickly, promises of high returns and supposedly exclusive opportunities as common warning signs of investment scams.
There will always be another investment opportunity.
The starting point should not be:
“How much could I make?”
It should be:
“What could I lose, do I understand the risks, and does this support my long-term financial plan?”
Because investing should not be about making a quick buck.
It should be about giving your money a clear purpose.
Frequently asked questions
What is the main investment lesson from Not a Penny More, Not a Penny Less?
The central lesson is that investors should understand what they are buying and avoid making decisions based entirely on excitement, tips or the fear of missing out.
Should I invest in individual AI stocks?
Individual AI stocks may offer growth potential, but they can also be volatile. Consider the company’s financial position, valuation, competitive advantages and role within your wider portfolio before investing.
Is cryptocurrency an investment or speculation?
Cryptoassets are generally considered high-risk and speculative. Their prices can move rapidly, and the FCA warns that investors should be prepared to lose all the money they invest.
How can I avoid investment FOMO?
Create a clear investment process. Take time to research the opportunity, consider the downside and decide whether it supports your long-term goals. Missing one opportunity is unlikely to destroy your financial future, but chasing the wrong one could cause lasting damage.
Risk warning: This article is for general information only and does not constitute personal financial advice. Investments can fall as well as rise, and you may get back less than you invest. Cryptoassets and other speculative investments can be particularly volatile and may not have the same regulatory protections as mainstream investments.
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