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The worst financial advice from around the web! (Today only)

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[Updated below! 10:58am PST 6:14pm PST]

Today is going to be awesome. As you may have seen, stock indexes are dropping all over the world. That means that the kooks are coming out today! There will be lots of pundits mouthing off about what this world is coming to. Oh, doom and gloom!

New York Times image of Japanese stock market falling
Image from the New York Times.

As you know, I have a very low opinion of Chicken Little Kooks and the media’s horrible performance at predicting economic performance. And I’ve previously written about how hilariously frantic the media behaves during “global corrections.”

So today, I’m going to catalogue the worst financial advice from around the web. If you see something, add a comment!

* * *

From this thread on Reddit:

When you buy things like index funds and mutual funds, what do you think you’re really getting? Both the good AND the bad companies, all piled together, with no way for you to separate them. The whole point of buying individual stocks is to minimize the number of bad stock in your portfolio.

Let’s say you buy an index fund, and you also know that there’s a company within the index that is not only terrible, but where you know that they’re about to completely go out of business. You’re watching their stock, and it’s tumbling, day after day. You know what you, as an index fund investor, can do about this? NOTHING! You just sit there and watch that bad stock flush your money down the toilet.

Or let’s say there are 3 industries within the index (manufacturing, technology, and retail), and you know without a shred of doubt that the retail industry is going to take a severe beating for the next several years, and you wish you stopped owning all those bad companies. You have no power! You’ll just watch your money burn, while hoping that the other two industries in the index pick up the slack.

Now, sure, in the end the good stock may outweigh all the bad apples in the index. But the fact that you can’t get rid of the bad apples is also the reason why the profits on these things, while generally consistent, are so low.

If you have the time and the inclination to perform detailed research into where your money is going, and if you’re smart enough to read books on how to do this correctly and minimizing the risks, then buying individual stocks is a great idea, and sticking your head in the ground and buying an index fund or ETFs becomes a gigantic waste of your money.

This Marketwatch column, by Mark Hulbert, is so incredible that I just decided to paraphrase it for you. I strongly encourage you to open it in another window and follow along.

‘Now and 1987 were very similar.

Of course, things are different.

To be sure, I am not sure what I am saying (and I use double-negatives to confuse you into thinking I am writing something coherent).

Now I am going to quote someone who says something inconclusive.

I will add some quotation marks now.

The “expert” I am quoting says things are pretty good.

But even if they go bad, they won’t be bad.

Ahh, my work here is done.’

[Updated, 10:58am] From this forum (forums are the best for these kind of quotes):

As the bubble market bursts, I predict a recession with an extra added bonus of inflation running close to 10% – before the end of 2008…If Bush continues to shovel shit on the dollar right up to the end of his term in January 2009, the inflation rate could hit 15%-20% by 2010.

[Updated, 6:14pm] Ahh, Fortune, you never fail to tell me your kooky forward-looking predictions. In this delightful article on real estate (“Real estate: Buy, sell, or hold?”), they say the following:

Our exclusive calculations can help you figure out what your house will be worth in coming years.

“Exclusive?” Really? This sounds promising! Only a few lines later, they write this:

Take a deep breath. We can’t tell you what your house would fetch tomorrow. But we can help you through the fog of whipsawing prices and vacillating views to develop a clear picture of what your house will most likely be worth in five years or so.

The key word is likely. See, I can predict anything to be “likely” if the time horizon is long enough. For example, I predict that you will likely gain weight in the next 20 years. I furthermore predict that you will likely have gray hair and that you will likely need to take some sort of medicine! HOW DID I DO IT??! I AM A GENIUS!!!!!!!!!!!!

Please add more horrible financial advice you find to the comments. I’m especially interested in finding people who recommend buying gold and tin cans full of oil and butter. They are the best.

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45 Comments on "The worst financial advice from around the web! (Today only)"

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7oby
8 years 8 months ago

You might want to link directly to the reddit comment as that thread grows bigger:
http://reddit.com/info/666ib/comments/c02yjeo

Michael
8 years 8 months ago

Hey,

That’s so true. So called “experts” are funny.
Whe the power of the internet we have looked in history about the french real estate in 1991 and a lot of previous “experts” are playing around !

Tyler Weaver
8 years 8 months ago

I look forward to today as well! It will be interesting to see who buys up all this cheap stock too.. Personally its probably not so good as this is how the middle class typically gets slammed by bigger interests, but its certainly interesting to watch it play out and the shift of wealth that occurs because of days like this.

I didn’t find any great quotable material, but most of it on gold seemed to be talking about how gold is still a buying opportunity.

zack
8 years 8 months ago

I’m pre-calling a Jim Cramer meltdown on Mad Money. What a loon.

Mike McHugh
Mike McHugh
8 years 8 months ago

My favorite was listening to a liberal talk show host proclaiming that today would be the start of a depression, not just a recession. In the commercial breaks, one of the spots they played featured the exact same host hawking a make-easy-money-in-fifteen-minutes-a-day-in-the-stock-market kinda product.

nr
nr
8 years 8 months ago

Between IWillTeachYouToBeRich and

http://patrick.net/wp/

I have lots of fun 😉

-=[OMF]=-
8 years 8 months ago

OMG!!! Your paraphrasing of Mark Hulbert’s article had me LMAO!

Thanks for the laugh and the much needed reality check that is sorely lacking in most corners of the web!

TDW
8 years 8 months ago

I really can’t understand the panic when markets do what markets do (go up and down) except among those with short time frames. In that case, you should not be in any overly risky investment.

Also, the market makes me queasy and I can’t seem to avoid sneaking a peek now and then, even though I know it will ruin my day. Kinda like looking at a car wreck as you pass…

That’s why I stay in real estate: There’s no ticker on it to give you the willies at times like these! TDW

planner
8 years 8 months ago
This article was actually posted the other day. It pretty much says that any market correction or recession is not a huge problem. We have seen it happen before and we have bounced back. But it goes on to warn that “Bernanke is risking a disastrous replay of the 1970s” and “while the economy is sending mixed messages about growth, the signs of increasing inflation are flashing bright red.” As a long term investor I am more interested in buying during these dips and watching for reaction to the fed cut and inflation concerns. Inflation could hurt me a lot… Read more »
Rob
Rob
8 years 8 months ago

Agreed, naysayers should shut their yap. I’m not worried about going bankrupt – if anything this will play out as a very good opportunity.

But that still brings up a big question. I don’t think I need to pull out all my money now to keep from losing it all, but it does seem that this is a position where the market is going to continue down for at least a couple more weeks, almost without question. Given that, wouldn’t I still be better off selling right now, holding till Feb, and then buying back in even lower?

Matt
8 years 8 months ago

For those confused like me, the reddit comment that Ramit quotes has been deleted. I guess the guy got slammed so hard by all the other commenters pointing out what bad logic he had caused the post deletion. So, if you’re looking for the idiot who wrote it like I was, then it’s no longer there (just listed as a deleted comment).

ericabiz
8 years 8 months ago
My favorite was the recent Kiyosaki article (as seen on quote.yahoo.com) : http://quote.yahoo.com/expert/article/richricher/62341 He is the EXPERT at saying absolutely nothing. He says: “Back in the 1990s, every time I had some extra cash I would buy some gold or silver.” Ok, first of all, “Rich Dad, Poor Dad” was not released until 2002. We all know he wasn’t rich until those books came out. Secondly, gold was a poor investment and underperformed the market throughout the 1990’s! What a crock. The sad thing is that people buy it and do whatever he does. I think the best Kiyosaki strategy… Read more »
Benjamin Bach
8 years 8 months ago

Hey Ramit
I am advising people to invest in what they understand. FOr some, it’s index funds. for some, it’s real estate. for others, it’s direct investment in business.

Investing in what you understand is the only sound financial advice I can give people.

I use to invest in stocks, when I worked at Merril Lynch, then I realized I didn’t understand the market 🙂 Now I’m investing in real estate in my local area, an investment I understand and am comfortable with. That’s all anyone can ask for

BenjaminBach.com

matt
matt
8 years 8 months ago

I’m loving this… I feel like Eddie Murphy and Dan Akroid at the end of “Trading Places”…
Just sitting here, waiting to “buy, buy… buy” during this panic.

Ben
Ben
8 years 8 months ago

Condoms. Invest in condoms. No, seriously. Not stock in Durex, but physical items.

When the former USSR collapsed, condoms were the most valued commodity in the country. Supply was extremely limited, yet demand was higher than ever. Booze and food could be produced locally. Raw materials could be salvaged. But few could produce more condoms!

They’re small and easy to store. Nobody else will have thought to stockpile them.

And, even if the economy never collapses, at least you’ll be protected in other ways.

zack
zack
8 years 8 months ago

Now for some good financial advice:

http://www.cnbc.com/id/15840232?video=626633432&play=1

Mike McHugh
Mike McHugh
8 years 8 months ago

My favorite today was the Washington Post. They ran the ‘market collapses! stock brokers perched on ledges!’ headline before the market even opened. And now that the DJIA has dropped ALMOST ONE PERCENT, their web headline is: “Despite Rate Cut, Stocks Fall Amid Recession Fear”

I’m glad that people have been generally smart enough to make their own decisions today, but deeply confused about why the media/pundits are seemingly trying so hard to manufacture a stampede.

Eric
Eric
8 years 8 months ago

@ Mike McHugh

That’s because the majority of the media and pundits have a vested interesting in pushing their political agendas (which is mostly to paint the current administration in as poor a light as possible) and to increase their ratings and circulation numbers by selling fear.

Then again, they may be part of a massive conspiracy to drive down the market so their cronies can buy in on sale. 🙂

Ignore these kooks. Ramit has one of the best attitudes that I’ve seen in the blogosphere regarding these nutcases.

Brian
Brian
8 years 8 months ago

Why worry? If you have a credit card, you can buy whatever you want! If everyone had credit cards instead of worrying about stock and other stuff, they could just use them to buy everything. I take my credit card everywhere, and if I don’t have enough cash, I just give them my credit card, and I don’t have to pay for it! Starving people in Ethiopia? They should have credit cards. Seriously, folks.

JT
JT
8 years 8 months ago

The comments are funnier than the post. I missed Mad Money…did Jim Cramer have a meltdown? I can only imagine…

And I loved the person who advised investing in condoms…lol…

Thanks for the great comments, it put a smile on my face…especially on a day where I ran some rough numbers for my taxes this year and realize I might be “AMT”ed…arrrgghhh!

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[…] The Worst Financial Advice From Around The Web A good point, made sarcastically: people who pronounce doom when the news is bad are usually paranoid. (@ i will teach you to be rich) […]

James Urquhart
8 years 8 months ago

I’m pretty much a complete novice when it comes to the stock market and investments, so all of this advice is going in one ear and going out of the other.

*phew*

Rick Francis
Rick Francis
8 years 8 months ago
Rob asked: >I don’t think I need to pull out all my money now to keep from >losing it all, but it does seem that this is a position where the >market is going to continue down for at least a couple more >weeks, almost without question. Given that, wouldn’t I still be >better off selling right now, holding till Feb, and then buying back >in even lower? Rob you are tempted to try timing the market, but it’s not a good idea unless you KNOW (not guess) the future. Say you sell now but the market doesn’t go down… Read more »
Gayle
Gayle
8 years 8 months ago
I am one of those wackos who attempts to time the market. I sold all of my individual stocks a couple of weeks ago at a solid profit after only holding those particular ones a few weeks. Just for fun I have kept track of what would have happened had I held. I would have been down over 23 per cent as of this am. Right now I am sitting on a mountain of cash in that account, just biding my time. Back in the early 2000’s took “professional advice” and believed that I couldn’t time the market. Lost 50k… Read more »
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[…] I Will Teach You to Be Rich: The worst financial advice from around the web […]

Mike
Mike
8 years 8 months ago
@ Gayle, Just out of curiosity, have you taken into account the tax implications (ordinary income vs long-term cap gains) of selling your stocks after holding them less than a year? If timing works for you consistently, consider yourself fortunate (or a genius). You could make a fortune teaching others your secret. I’ve researched enough to assume that timing the market just doesn’t work so well for most of us in the long term. As for me, I’m doing fine buying in at regular intervals (so I average the market’s lows and highs) while holding for the long term. Happy… Read more »
Is Gold Bad?
Is Gold Bad?
8 years 8 months ago

Buying gold when it was less than $300 an ounce was a really great deal. I know mocking those who say that is a great sport, but they have been right for the last 5 years. It may not continue up as sharply, but then neither may the stock market. The market also has its times of staying stagnant for many years….

Randy Dailey
Randy Dailey
8 years 8 months ago

The guy who predicted 10% inflation isn’t that crazy, as that’s definitely the direction we’re headed. Have you looked at commodity prices lately? The core CPI isn’t the whole story. This pretty much tells you all you need to know about the fall of the dollar:

>10% inflation is hardly unheard of, it happened for 4 or 5 years during the 70s and early 80s. Its naive to think that somehow our economy is too sophisticated to repeat it. “Stagflation” could be around the corner.

Prashanth Ganapathy
Prashanth Ganapathy
8 years 8 months ago
While I agree to an extent with you about the MSM going haywire with their predictions, I would have liked to see you put your perspective to the mess we are in. Housing >>>>> Financial >>>> consumer >>>>>> all others follow. Is this the way we are supposed to live? In constant doubt and uncertainty??? Why is this country pouring money outside when it doesn’t have money of its own? (Trade deficit, Budget deficit, trillions in debt) How can the presidential candidates say they are going to solve problems like health care and illegal immigration without talking about reduced spending?… Read more »
Gayle
Gayle
8 years 8 months ago
For Mike That particular account is an IRA. Therefore no tax implications. That being said there are two other retirement accounts that I make no attempt to time. One I am actively contributing to, and taking advantage of dollar cost averaging. The second is a 403b that is invested in funds that I have actually been quite happy with the performance over the years. But I had to wrench out of the hands of the company’s chosen fund group to achieve that. You could say I am trying it both ways. Just another way of spreading risk, I am not… Read more »
Reuben
Reuben
8 years 8 months ago
Prasanath – I’m not sure I like your comment, “or we become Japan and live in shit-land for 20 years.” I hope that I am misunderstanding you and that you are talking about the Japanese economy over the past 20 years, and not living in Japan, which by every measure I read is one of the most pleasant places to live in the world (even more so if you’re not Japanese). I know their economy has sucked, but for a great many people living there now is even more paradisical than it was before (partly because of the deflation) and… Read more »
Bryan
Bryan
8 years 8 months ago
First comment ever! This is a fantastic website and I love your writing style. However, one thing sticks out for me — why are you repeatedly dissing putting money into gold? With such a prudent financial perspective, I’m surprised by the way that you shrug it off. Over the long term it is an excellent way to retain the value of your savings, especially in during a period of dollar weakness. It’s what people do when they freak out because everything that looked so good, now looks too good to be sure and at the end of the day gold… Read more »
Prashanth Ganapathy
Prashanth Ganapathy
8 years 8 months ago

Reuben

I was talking money the entire time and referring to the japanese economy. Since you have brought it up, I would like to add that japan could still do well for itself even through 20 years of recession because their economy is very limited and well defined with few moving parts. However the US economy has too many moving parts and can very different effects than what happened in japan.

Prashanth

Carlin
Carlin
8 years 8 months ago
For the guy asking about selling and waiting a couple weeks. If you sold everything Tuesday morning or Wednesday when the market was dropping again, then you missed all the gains on Wednesday and Thursday. It’s also impossible to tell what will happen tomorrow, or what will happen over the next two weeks. Odds are, you’ll be wrong more often than you are right. Personally though, I much prefer buy and hold for numerous reasons, and not just because it seems simple. It helps stop a lot of emotional decisions that could really hurt your returns, like panic selling, and… Read more »
Mike
Mike
8 years 8 months ago
@ Reuben, I’ve lived in Japan for a little over two years now, just south of Yokohama (which is just south of Tokyo). Economically, the country is still in shambles. Interest rates are incredibly low, so low in fact that I know some folks with 1% rates on mortgages. The larger problem, though, is that the personal savings rate here sucks. The average Japanese consumer is up to his/her eyeballs in debt. Prices are extremely high and the social norms (and some laws) basically force people to continually spend beyond their means. It’s not uncommon for a brand new driver… Read more »
Shane
Shane
8 years 8 months ago

@MIke:

Think Japan is bad? You should try living in Korea.

Mike
Mike
8 years 8 months ago
@Shane, funny you mention it. One of my coworkers just moved from Korea, having lived 3 years in Seoul. He shares your sentiments. @Gayle, my inquiry wasn’t out of concern, more just general curiosity. I incorrectly inferred from your initial post that you had developed a “time the market” approach with your entire investment portfolio instead of playing it both ways as you mentioned in your reply. I always cringe when I see and hear of people trying to time the market regularly and on a site like Ramit’s where the target audience is the youngins, I wanted to get… Read more »
evie
evie
8 years 8 months ago

Mike, your information on Japanese culture is eye-opening. Thank you for sharing.

trackback

[…] The worst financial advice from around the web! A funny round-up by Ramit on the doomsayers of our new financial apocalypse. No need to rush out to your bunkers yet folks. Palestinians rush into Egypt through wall breach I guess not everyone is too happy about that new government in Gaza […]

Noah Davis
Noah Davis
8 years 7 months ago
Why is buying gold bad? (As you inimated at the end of your email missive this morning, 2/6/08.) It’s up more than tripled since 2002 — heck, it’s risen more than 50% since Jan. 1, 2007 — and if the dollar continues to sink, provides a worthy, if conservative, investment that will retain buying power. I’m not suggesting that you dump all stocks and simply invest in gold, but I do think a 10-15% stake in gold (physical gold, not ETFs or mining stocks) is a good investment, at least for the short term. Unless someone can convince me otherwise…… Read more »
Richard Spicer
8 years 2 months ago
I believe the reality is not “kooky” Doom and Gloom, but instead that the United States has slipped from a leading world power to a 2nd class country. We’re no longer number 1 and with the way our education system and financial prowess as a country is we won’t be for a very long time. We’re now about on par with New Zealand and Canada. The good news in this is and will continue to be a transfer of wealth between the Middle Class and the Upper Class. We’ll see more people who know how to manage their finances poorly… Read more »
Harm
Harm
8 years 2 months ago

I couldn’t guarantee where the price of gold will be
anywhere in the future, but “buy low, sell high” is still
good advice, and I’d say that gold is ‘high’ right now
(900 to 1000 dollars). People HAVE made money buying
high and selling higher, but that’s hard to do. I’ll predict
that even people who bought gold at $300 would have done
better (from the perspective of 3 years from now) buying almost any stock fund. Sure, I could be wrong, but I’m sure
not buying any precious metals at these levels.

Richard
8 years 1 month ago
I disagree about precious metals. You’re looking at it like a trader would look at it. Precious metals store wealth, They’re not an investment as they don’t pay dividends. The growth in gold’s value reflects the growth we’ve seen in commodities across the board. An oz of gold has typically purchased the same amount of Crude Oil through out recent history. I believe that the value of gold and other precious metals is finite and it is the price of currency that changes, as gold holds onto it’s purchasing power. Gold is where you want to keep your emergency fund,… Read more »
Chi
2 months 25 days ago

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