What Othello teaches you about investment scams

William Shakespeare’s tragedy from 1603 is a tale of jealousy, suspicion and revenge. It tells the story of Othello, a Moor who is put in charge of the Venetian army.
His decision to appoint Cassio, instead of the more experienced Iago, leads to Iago taking revenge by coming up with a plot to convince Othello that his new wife, Desdemona, is having an affair with Cassio.

Eventually Iago’s treachery is exposed, but not before Othello has killed his wife. The play ends with Othello committing suicide and Iago being arrested.

The key moment

Othello isn’t the only one who is taken in by Iago’s schemes. Roderigo, a wealthy gentleman and one of Desdemona’s unsuccessful suitors, is also tricked into selling his land and giving Iago a large sum of money.

By act two, Roderigo is nearly bankrupt and is about to throw in the towel. However, Iago convinces him to keep going by arguing: “How poor are they that have not patience!/What wound did ever heal but by degrees?”

The lesson for investors

Beware of scam merchants – they can be very persuasive, making convincing appeals to your vanity and fear of missing out. You should be very wary of anyone who tries to sell you an investment scheme or trading system.

The UK financial watchdog, the Financial Conduct Authority (FCA), has an easily searchable website where you can find data on enforcement action or warnings of scams. If a firm or manager has been involved in dubious schemes before, it goes without saying that you should give them a wide berth.

However, new scams come up all the time, so there’s no guarantee that the FCA will have any record of them. So always hang up on cold callers, and never forget the golden rule – if it sounds too good to be true, then it is.

Other financial wisdom

Iago is a manipulative crook, but his point on patience is valid. Investing in stocks for the long run reduces your chances of losing money. The longest period of negative real returns has been 22 years in Britain (1900-1921) and 16 years (1905-1920) in the US. And the odds of returns on shares failing to beat those on bonds falls sharply over time, from roughly one in three over a year, to nearly one in 200 over three decades.