It’s been a while since I tossed a rant your way. The weather is warm and the drinks are cold. Life has been good. Rants are largely a product of foul moods, so I just haven’t been feeling it.
However, the other day, I noticed a ridiculous story on a financial “news” website. It went something like this:
Why the Markets May Double before 2020!
That got me thinking about bad advice. Every time I came across some nonsense, I made a note. Those notes turned into this post. Enjoy!
I know a smart person who was tricked into buying a very expensive investing course ($10,000 for a week). In the advertising materials, the “guru” mentions ‘consistent 30-40% monthly returns.’ Anyone who thinks a statement like this contains even a shred of truth doesn’t understand compound interest. Hell, they don’t even grasp basic math. Let’s review the numbers with a silly scenario:
I took Mr. Guru’s course, but didn’t pay attention. Because I was staring down at my phone instead of absorbing his “wisdom,” I failed to implement his system correctly and only earned 12%/month. Per the Rule of 72, my investment doubled every 6 months. Here is how much money I have at the end of each year, starting with $1,000:
- Year 1: $4,000
- 2: $16,000
- 3: $64,00
- 4: $256,000
- 5: $1,024,000
- 6: $4,096,000
- 7: $16,384,000
- 8: $65,536,000
- 9: $262,144,000
- 10: $1,048,576,000
After just 10 years of drastic underperformance (remember that I only made 12%/month instead of 30-40%), I’m a billionaire!
But let’s not stop there:
- Year 11: $4,194.304,000
- 12: $16,777,216,000
- 13: $67,108,864,000
- 14: $268,435,456,000 (I’m now worth 268 billion and am the richest person on earth! Suck it Bezos!)
- 15: $1,073,741,824,000 (I’m the world’s first trillionaire)
- 16: $4,294,967,296,000
- 17: $17,179,869,184,000
- 18: $68,719,476,736,000 (I can now pay off the United State’s debt and have 48 trillion left over)
- 19: $274,877,906,944,000
And I end big at year 20:
I’m the world’s first quadrillionaire!
I’m in the Quintuple Comma Club!!
What would I do with my quadrillion? I have no idea, but I’d start here:
Even more incredible is that people believe this garbage.
The main problem with gurus is this:
If someone really had a system to beat the market, shouldn’t he/she just use it to enrich themselves? Why waste time teaching classes?
I asked this once and the response was:
He loves to teach and help others.
Furthermore, if someone did have a system that really beat the markets, telling anyone about it would be a massive mistake. People would flock to the better mousetrap which would soon render it ineffective.
Sadly, I will not be a quadrillionaire or even a billionaire any time soon. However, Van Halen isn’t relevant, so maybe they will play my backyard?
More Crappy Advice
There is no shortage of bad financial advice. In fact, almost all of it is shit. And today is your unlucky day because I have more for you! Brace yourselves.
Sell in May and go away.
Don’t time the markets. Just don’t. The only thing to stay away from is this nonsense.
The guy who predicted <insert market event> in 1999 now says <insert market event> is coming!
Sure, one person got it right. The other 363,873 got it wrong. And how many other predictions has that one person gotten correct since?
Mrs. Adventure Rich chimed in:
Short-term investing is gambling. Long-term, not so much.
Billy Goat Finance had this to say:
The cult of home ownership is a strong one even though houses don’t rise faster than inflation. I do think there are cases where buying a home is the right choice, but it’s not a slam dunk.
Why the stock market may go up <insert random number> in the next <insert another random number> months!
More short-term bullshit. No one has any clue what the markets will do in the short-term.
Stop Ironing Shirts had some good ones:
WARNING, SARCASM AHEAD!
Buy gold! Sure! Don’t forget the ammo and hard liquor. All of those things will be currency when the world devolves into martial law. If you have enough money, build a bunker too. Do it out in the country because cities will be in flames.
Chart talk drives me nuts too. Past performance does not indicate future results, especially in the short term.
I’m holding out for a correction.
Good luck with that. I remember people saying this back in 2012 when I was getting ready to launch this blog. The market has since doubled.
Is Any Advice Worthwhile?
Most advice is pure garbage. Instead of reading charts or trend lines or paying a guru $10,000, embrace index investing or teach yourself about real estate and buy property. That’s what I’m doing and it’s worked out well.
How about you? What nonsense have you heard lately?
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