Home Best Practices Financial Cautionary Tales from the Big and Small Screen

Financial Cautionary Tales from the Big and Small Screen

by Jackson B
Financial Cautionary Tales from the Big and Small Screen

Film and TV are full of spectacular financial failures, but there are also plenty of financial success stories where characters manage to get rich with seemingly little effort at all.

From the comfort of our sofa, we might be tempted to try some of these techniques ourselves, but just how achievable are they?

Sadly, in most cases, they probably won’t be very realistic! We love film and television because they give us drama, excitement and escapism, not because they offer educational lessons on how we can best manage our finances.

But that doesn’t mean that our favourite films and TV shows can’t teach us anything about money and financial risk. From investing to business planning to major purchases, we can all take some tips from the financial successes and failures included in the following films and television series.

Downton Abbey

Lord Grantham made a rookie error in series 3 of Downton Abbey when he invested the majority of his wife’s fortune in a single Canadian railroad company, even going against the advice of his lawyer, Mr Murray, as he believed it was a guaranteed money-maker.

However, the company he invested in went bankrupt and he lost the lot. This loss put the future of Downton Abbey at stake; Lord Grantham had risked his whole family’s home and livelihood on the fate of a single company.

As Lady Grantham quite reasonably asked: “Why were you so heavily invested in one enterprise? Wasn’t it foolish?”

Lesson Learned: Diversify your investments to minimise risk.

It may seem unlikely that in the 21st century you can take financial lessons from a fictional, 1920s aristocrat, but the basic rules of investment never change.

Investing a large sum of money in one stock always brings huge risk, as if it fails you could lose everything. However, if you diversify and invest in different stocks and bonds, you spread the risk and minimise the chances of losing all your money should one stock fall in value.

This applies to saving into a pension too, where you can diversify risk by selecting a fund or several funds that invest in a mix of different assets or different regions and countries.

Lord Grantham was lucky that his son-in-law and heir, Matthew, conveniently inherited a large sum of money, which ultimately saved Downton – but not everyone that takes such a big financial risk will be left money in a will to make up for their losses.

Limitless (2011)

The sight of Edward Morra (Bradley Cooper) sitting in front of a computer making incredible amounts of money as a day trader in Limitless may seem like an attractive way to get rich quick.

Morra had taken an illegal nootropic supplement that boosted his ability to understand data and helped him make money by trading, but how would an average person fare if they tried their hand at day trading?

Lesson Learned: Day trading is tougher than it may look.

Day trading is when you buy and sell assets, such as shares or foreign exchange (forex) over a single day of trading. Day traders make profit from small price fluctuations over the course of a day, rather than as a long-term investment.

While Limitless and other films can make it look easy, the reality is that day trading is unlikely to be profitable for most people. First, you would need to study and become an expert in it which would take a lot of time and effort. But, crucially, you would need to be willing to risk large sums of money that you can afford to lose because you need to invest big to get a decent return from the small, daily changes in price.

Instead of day trading, people may benefit from considering longer-term and lower risk investment options in a diversified portfolio, which could include contributing to a pension and saving into a stocks and shares ISA.

Silicon Valley

(Articles of Incorporation, Season 1 Episode 3)

In comedy series Silicon Valley, Peter Gregory made a massive profit by investing in the right shares at the right time. He invested in Indonesian sesame seed futures after correctly predicting that they would rise in value as Brazil and Myanmar, which are the other major sesame seed suppliers, were due to face cicada infestations that would devastate their harvests.

While Peter’s strategy paid off, timing investments in the stock market to yield big profits is not as easy as he made it appear.

Lesson Learned: “Timing the market” is tough, even for the most experienced.

Peter made it seem relatively easy to predict the market and make a huge profit, but it was a risky strategy and it could easily have gone wrong.

For many people, trying to time the market by investing and selling at the right moment will result in more losses than successes. To stand a chance of profiting from the market, you would need to consistently be up-to-date on industry trends and the potential impact of global events, but even experts who try to time the market may still end up with lower returns than those who invested for the long-term.

Trying to time the market is a risky strategy that won’t always pay off. Putting your money into different longer-term investments and riding out any short-term drops in value can often be a less-risky way to grow your money, although this growth could be slower than the higher-risk investment strategies and still isn’t guaranteed.

Especially if you are new to investing, it can be a good idea to get professional financial advice before making any investment decisions.

The Money Pit (1986)

The Money Pit, starring Tom Hanks and Shelley Long, shows us the perils of letting our emotions rather than our head rule our purchases.

A remake of the 1948 film, Mr. Blandings Builds His Dream House, The Money Pit shows Walter and Anna getting swept up in the idea of buying a dilapidated, old mansion and renovating it. However, after buying the property, they find that it is in no fit state to live in and needs to be rebuilt.

So ensues a long line of repairs, crises and disasters that cost the new homeowners eye-watering sums of money. In true Hollywood fashion, everything eventually works out for the best, but it could have been a very different story!

Lesson Learned: Use your head for big purchases, not just your heart.

Emotions can undoubtedly play a role in big purchases and investments, especially when you’re buying your dream home. But rather than impulsively buying a property that you’ve fallen in love with, take time to have it surveyed, assess how much work needs to be done and work out how much everything will cost.

The cost of renovations can skyrocket, so without a proper plan or budget in place, your dream house could quickly become a living nightmare.

In the films the characters are somehow able to spend more and more money on their house, but in reality, you could quickly run out of funds and need to take on debt to finish your project.

Although films can portray a more romanticised image of buying a house, you should always use your head and be rational when making major purchases and investments as this could avoid bigger financial problems later on.

Deepak Shukla, founder of Pearl Lemon, uses his experience of investing in student accommodation projects to warn people to be cautious when going into property:

“If you are new to investments, having an advisor will save you a lot of heartaches.

“Emotions can get in the way. It’s effective for someone to guide you and show you when you should cut losses – in time and money!”

Rick and Morty

(Close Rick-counters of the Rick Kind, Season 1 Episode 10)

Rick and Morty fans may remember when Jerry showed “Doofus Rick” his collection of R2-D2 coins. Jerry says only a limited number were minted, so his implication is that they must therefore be valuable.

Rick’s response is something that anyone thinking of investing in collectibles can learn from.

He said: “I’m not going to tell you that these [coins] will increase in value, or even hold their current value. The truth is, you bought them because you like them. They have value to you. That’s what matters.”

Lesson Learned: Think of collectibles as a hobby first, and a money-making investment second.

You often see headlines that collectible items like coins, artworks, stamps, first editions and other memorabilia have sold for huge sums at auction, so it can be tempting to think that investing in collectibles can bring you a nice profit.

However, you will only hear about the rarest items in the best condition that sell for the most money. The reality is that most collectibles won’t offer such great returns.

It is difficult to predict what collectibles will become more valuable and how much they could be worth, as so much of it is linked to emotion and nostalgia rather than their actual intrinsic value. For example, Pokémon cards are intrinsically worth very little, but rare cards and sets in pristine condition have fetched hundreds of thousands of pounds at auction.

People who get into collectibles will usually do so because they have a passion for that area. Their expertise would put them in a better position to make money from their collectibles, but they are also likely to enjoy the activity and are not simply motivated by making a profit.

Paul Cox from Pure Wealth Management underlines the risk that investing in collectibles brings:

“Collectibles are incredibly subjective.  They are worth precisely what someone is willing to pay for them at that point in time.  As such consider all collectibles as a bonus or tertiary part of your investment portfolio.

“Market trends and fashions will build value and take it away, with very little warning. These types of collections also create a concentration risk, so if you feel that antique clock is going to provide your wealth, then all of your eggs are in one basket.  Diversification is key – employ a professional independent financial adviser to help make the most of your opportunities.”

The Simpsons

(Lard of the Dance, Season 10 Episode 1)

In this episode, Homer Simpson thought he’d stumbled across a quick and easy way to get rich – by selling grease. He immediately started frying bacon to collect the left-over grease, which sold for a measly 63 cents, before then trying to steal larger amounts of grease to boost his takings.

Of course, there are a lot of flaws in this business model, not least the fact it relies on stealing! But there is another important message we can take from Homer’s failed business venture.

Lesson Learned: Your “next big thing” may not be a “thing” for a reason.

It’s not enough for you to have a great idea for a business; you need to research it to make sure it is a viable business venture.

To start, you should research the industry you want to go into and look at any competitors to see if you are offering something new. If you are, you should see if there is a reason why no-one is doing what you are thinking of.

You would also need to find out if there is a demand for your product or service, work out the costs involved to see if it’s profitable and figure out the practicalities of the business to see if your idea can actually work.

Harry Fenner, CEO of Navana Property Group, confirms the importance of research if you have an idea for a business:

“Being interested in the markets and wider economic factors will help you with the sometimes tough financial realities of setting up a business. In my experience having ideas is the easy bit but making money from those ideas by being commercially aware is what separates good businesses from bad ones.

“By making market research a priority, you can gain insight into your target audiences, areas of demand and the future trajectory for your business’ growth.”

The only “research” Homer did was finding out that he could sell grease and where to sell it, and a few simple checks would have shown him that his plan was a complete non-starter.

WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment, your capital can be at risk and you may get back less than you originally paid in.

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