Of all the many seductive get-rich-quick strategies out there, until recently one of the biggest particularly in the United States – was “flipping” real estate.

Speculators would buy a house, fix it up, and sell it again for a much better price. The attraction was the high profit versus the expense: for a few thousand dollars in paint and contractor work, the entrepreneur could reap 20% or 30% in profit after the sale. In fact some houses and condos were purchased and never occupied. A few months of waiting and the empty units were sold at hefty profits. As fans of the TLC channel will recognize, my title for this article is borrowed from the popular TV show of that name. But personally, I suspect the show won’t make it to next season: this particular wealth-creation vehicle now seems to have been slammed into reverse. Many highly leveraged speculators in the U.S. appear to be heading for the exit ramps at high speed.

Traditionally, real estate has always been a great way to build wealth. Most of the wealthy people I know can trace a significant portion of their assets back to dabbling in it. Unfortunately for speculators, though, real estate is one of those investments that works best over the long term. But the point about flipping is that it’s a short-term strategy.

At the height of the house-flipping boom, seminars abounded to educate “average Joe” speculators on the art of the transaction. To all appearances, the activity seemed to be risk-free and to offer high returns, so it attracted a lot of players – who often ended up bidding against each other to capture the market jewels in any given community. Those seminars generally ignored the risks of the operation, since “risk” seemed to have permanently left that particular building.

In fact, the house-flipping trend had all the hallmarks of a speculation frenzy. There are certain ingredients required for a good frenzy: the first, of course, is a few years of abnormally high returns. The second is discounting the risks; and the third is the rise of gurus selling workshops on how to cash in on the boom. Such gurus claim to have found the secret to endless wealth (though the cynic might well wonder why anyone who’s found the pot of gold would feel the need to tell everyone else its location).

When dazzled by the prospect of high returns, a good rule of thumb is to play the game of “Find the Risk.” There are no free lunches in the investment world; every increase in your return (over the basic risk-free rate of treasury bills) means accepting some degree of risk. As with any equity asset, the risks of house flipping are real – and they can quickly turn against you.

What about the risks of other kinds of investments? Some hedge funds are a good example of investments that appear to offer high returns with little risk. The value of the shares stays steady, and the funds seem to push out 5%, 10%, even 30% in a good year.

But hedge funds should make some investors a little nervous, because it’s hard to get a good look “under the hood.” The normal routine is for you to send in your capital, and the manager will implement the usual strategy of that particular hedge fund. The strategy varies: it might be long/short equity plays, short bonds of one currency in favour of bonds in another currency, short stock in favour of convertible debentures, and so forth.

In fact, there are hundreds, if not thousands, of hedge fund strategies. Some of these strategies actually are safe, but many others just look that way. You need to know which is which, because otherwise you’re like a man who’s walking in front a steamroller picking up nickels. It feels perfectly safe – until you look over your shoulder.

The bottom line is that to combine high returns and reliability, you need to think long-term. The best strategies are very rarely the “flavour of the day” speculation. When some investment activity is all hyped up, and everyone is doing it – take my advice, and give it a pass.

Of course, that’s boring rather than exciting; and you’ll need to wait a while before your sensible investment bears fruit. But rushing to harvest has never been the best financial strategy.