The only free lunch in investing

Life is a fascinating journey filled with unexpected twists and turns, and sometimes we’re faced with opportunities that seem ‘too good to be true’.

In 1965, a 47-year-old smart French property lawyer named Andre-Francois Raffray was thrilled to strike a deal that he felt sure would provide a guaranteed high return and secure his financial future. However, what initially appeared to be a win-win situation turned into an extraordinary, cautionary tale about investing, risk-taking, and putting all your eggs in one basket.

He agreed to pay a 90-year-old widow called Jeanne Calment a monthly payment of 2,500 francs in return for the right to own her apartment upon her death. At the age of 90, she had already exceeded her natural life expectancy by 10 years and could expect to pass away at any moment. Or so he thought.

Buying property in this way is common in France. Known as “en viager,” or “for life,” it creates a mutual contract whereby an elderly owner receives a regular income in return for passing on the property to the buyer on their death, whenever that occurs. An early form of ‘equity release’ schemes, which have become popular in the UK over the past few years.

Jeanne Calment was born in Arles, southwest France, in 1875, 10 years after Abraham Lincoln’s assassination, and recalled, as a teenager, selling pencils to Van Gogh in her father’s store.

She lived an extraordinary life. She took up fencing at age 85, was still riding her bicycle at 100, and smoked two cigarettes every day without fail. She was definitely not average. In fact, she went on to set a Guinness World Record as the oldest person to ever live, finally passing away at the age of 122, three years after the ill-fated lawyer, Raffray, who died in 1995 at the age of 77.

Even after his passing, his surviving family was still responsible for making the monthly payments, and by the time of Jeanne Calment’s death, they had paid her over 900,000 francs, which was more than twice the value of the property!

Calment’s only comment at the time was, ‘In life, sometimes one makes bad deals.’

So what are the lessons we can learn when it comes to investing to secure our own financial future? 


The lawyer took the broad average (most people die before age 95) and applied it to a sample set of one, ignoring the fact that, in life, there are always outliers. 

Over the years, people have told us about ‘sure thing’ investment opportunities;

  • A new property development where a fast train link is being built nearby.
  • A hedge fund that has delivered excellent returns over the last 12 months
  • A successful friend’s exciting new business venture that ‘can’t go wrong’.

Our advice has always been the same: ‘Don’t put all your eggs in the same basket.’

This is one of the fundamental building blocks of our investment philosophy.

For example, our most popular investment portfolio has over 13,000 underlying securities. In other words, if you invest in it, you become a part owner or lender to 13,000 different companies and organisations spread across the world, from Europe and Asia to North America and the emerging markets.

In the event of one company running into difficulties or even going bankrupt, it barely registers within the overall portfolio, due to the magic of diversification.

We often talk to clients about the importance of creating a ‘family fortress’ and holding the vast majority of your investments in our low-cost, globally diversified, proven portfolios. That way, the markets can do the heavy lifting and generate the returns you need without betting on any single country, asset, stock, or ‘latest idea’.

In our own lives, we encounter numerous opportunities and decisions that require careful consideration. It’s crucial to assess the risks involved, examine the potential outcomes, and consider the long-term implications. Consider the downside as well as the potential upside.

While it’s normal to seek out higher returns or to be attracted to a compelling idea or sales pitch, we need to keep in mind that there are no guarantees in life (other than death and taxes, but that’s another blog post!)

The fascinating story of the Calment/Raffray deal is a reminder that sometimes even the most logical and promising decisions can lead to poor outcomes. It also highlights the importance of prudence, caution, and rational thought.

By avoiding the temptation to put all your eggs in one basket and taking unnecessary risks, we can better safeguard your future and find a balance between pursuing your ambitions and protection from life’s uncertainties.

To learn more about our investment philosophy, watch this short video with our Investment Director, Graham McCulley.

Alan Smith

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