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:
$1,099,511,627,776,000
!!!!!
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:
Incredible.
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.
END SARCASM
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?
Hooray for a rant!!! It’s been a while, life is just too good!!
Most investing advice is bs. Just like most other advice for that matter. As I’ve gotten older, I firmly believe in Occums Razor… the simplest answer is usually right.
“the simplest answer is usually right.”
Yep, but that isn’t intuitive to most which is why investing is difficult: “This investment must be better with this high paid, Harvard grad picking the stocks!”
i only want this audience to follow your sound advice. i need the rest of the masses to upgrade their phone every 6 months, get the tinder goldmember upgrade, play the sh** out of some video games and binge watch netflix until they have calluses on their asses. they keep my stocks going in the right direction and we don’t want to stop the party fueled by irresponsible spending, eh?
freddy smidlap recently posted…Good Eats for Cheap #1 – Artisan Bread and Grilled Turkey
I’ve always wondered how the markets would react to the entire world practicing extreme frugality. It would be pretty crazy to think about.
Jason@WinningPersonalFinance recently posted…Don’t Let Keeping Up With The Joneses Lead You To Financial Ruin
My Tesla stock wouldn’t be doing so hot!
Love this rant, so good. But trust me, if you’d seen Van Halen lately you would certainly not want them in your backyard or anywhere near your ears . . .
or your money, they may need a loan. 🙂
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Thank you Liz!
Nice one Carl, missed your rants there for a while. Love to see you still got it 😉
Thanks CF!
I am but a simple man and have only one request. If Van Halen plays in your backyard, PLEASE let it be the version with David Lee Roth. Sammy Hagar never did it for me.
Thanks for the pick me up,
CD
Haha, what about the very short lived Gary Cherone era?
You always need to be prepared for a Zombie Apocalypse….. 🙂
There are lots of pundits out there who are talking their book or trying to sell you something. Most of them were a one-hit wonders where they made a call that actually paid off, Now they are trying to cash in. Think about the guys who cornered the British pound, called the subprime meltdown, went to cash before Lehman crashed, bought real estate after the bust, etc.
I think you need to find a system that works for you. Some people like real estate, some like stocks, some mega save, some buy lottery tickets. Do what works for you, you’ll stick with for the long term and makes you comfortable.
I had a friend put thousands into an online course on how to find a job…. because the investment was supposedly worth the return. He had plenty of connections on his own, but he turned to some “Guru” instead. I tend to think there’s something wrong when someone charges thousands of dollars, but doesn’t actually give you the time of day!
Steve recently posted…Don’t Retire Yet – Start A Plan First!
Love it Carl! Almost all investing advice is complete garbage…. except for maybe the most simplistic and obvious ones like:
Always try to be compounding throughout your lifetime.
Rule number 1: Never lose money. Rule number 2: Never forget rule number 1.
Be fearful when others are greedy. Be greedy when others are fearful.
Those are some of my favorites. 😉
Mr. Tako recently posted…The Investor Disease
HA! Sweet rant, and glad to see my tweet made it on the wall of fame!
Greed feeds bad financial advice, plain and simple. If we all weren’t in such a rush to get rich those dang late-night infomercials would go away:)
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“Guys, what do you think? I have 5,000 to invest and I’ve come up with this strategy where I’ll be investing 30% in fund A, 20% in fund B, 10% in fund C, 10% in fund D, 10% in fund E, 5% in fund F, 5% in mutual fund G, 5% in gold and 5% in bond funds from Peru*. Do you think that this is a good allocation?”
…and then others start discussing whether or not the 5% in mutual fund G should actually go to fund H which is like fund G but with/without valuta adjusted …. snore…
* just checking who is still reading
I just got “60% stock is way to low for a retiree. Your money will never last 40 years.”
Um, that is more stock than the default setting everyone references from the Trinity study. Maybe I am somewhat low, but surely not way off.
Amen. I’m all about the slow and steady just keep piling cash into low fee index funds on an automated basis.
Regarding 30-40% every month, I would state my experience. I been in Indian stock market since 1980 and since last five years also started dabbling in future and options. Mostly in selling options, earlier three years were mostly profitable with a return of 0.5% to 1% including two three months of facing heavy losses but fortunately it recovered by the square up time. With the experience gained in three years I upped my bets, the fact that all the profits of three years were fully reinvested also helped me immensely. For the last two years I am getting a return of 5-10% per month(not exaggerating) , this period has one month where the return was 0.5%. I am myself astonished and waiting for the nasty surprise when it will and shall come. Every month I have been taking 50% of profits aside for the last ten years. What I am doing is not scalable and definitely risky but til now it has been working. It also helps that indian rupee is perpetually weak and inflation is 6-10% per annum . This goes in my favor.
Is investing in online marketing worth doing?