Martin Hawes: Lessons each generation learns the hard way

Photo / Kenny Rodger

To anyone interested in finance, the past couple of years have been fascinating.

A major credit crunch, bank collapses, government interventions, volatile markets and the world on edge - it will be talked about for decades.

While all this was going on, I was writing a book: Letters to Aston: Lessons Learned from a Lifetime of Investing.

Aston is my 3-year-old grandson and the book comprises 30 letters about what I have learned of investment.

I was not bothered by the latest tax rates or insurance products - I want Aston to know the fundamental truths of investment for when he faces his own booms and busts as an adult.

It was a fun book to write. Giving my grandson something enduring that will help him was good enough, but writing against the backdrop of financial turmoil helped sharpen it.

Having suffered the economic rollercoaster of recent times, there are many who think there are no financial certainties - that the money world has no constancy.

In fact, if you read economic history you will know that events like it have happened many times. Each generation forgets the lessons learned from previous bubbles and crashes. It may seem like this time is different - but it never is.

Because we have seen it all before, investment principles have developed, such as the difference between speculation and investment, the correct use of debt, the principles of asset allocation and buying in gloom to sell in boom.

The latest advisory group, investment product or theory are useless if you do not understand the basics. Aston will need to remember these for his lifetime and in setting them out, I hope he will not have to learn these principles as most do - the hard way.

* Martin Hawes is a financial adviser. His disclosure statement can be found at www.martinhawes.com