You can't teach money

[unclemick]

Well let's see - after forty years as an investor, thirty as a rocket scientist and reading a lot of stinking books - when the light bulb came on as to how screamingly stone simple it all was - it's a little embrassing and ticks me off that I wasted all that time:

Pssst - Wellesley or if you'd really rather have a Buick with chrome trim - Target Retirement.

As for all the rest - like duh! Spend less than you make.

heh heh heh - And don't read no stinking books!

Do or do not - there is no try (Yoda).

 

[FinanceDude]

Hmm...I took a trip down to san simeon to tour the Hearst Castle about 15 years ago. That was the first time it really occurred to me what it was like to be truly, ridiculously rich.

Around the back we got to look at a 'fountain' that would have qualified as a full blown major pool in the average homes back yard. Story was that Hearst saw it somewhere in europe and liked it, so bought it, had it disassembled and transported to his place and reassembled. Further story was that he rarely even looked at it or spent any time near it.

Just to reinforce this, the only way to bring stuff like this to his estate at the time was to bring it in by boat to the shore and haul it up a series of cliffs.

IIRC it cost something like $5M to deconstruct, move and reconstruct it. And that was in the early 1900's.

So perhaps a $750k fountain is really a pretty LBYM item.

My dude wasn't a Hearst, Rockefeller, or anything like that. Rumor has it that Warren Sapp had a 5-day party that cost him $1.15 million, now THAT's a party.........

 

[Leonidas]

CFP is not on the table for 2008, too many personal distractions with the family..........

You mean you're not even CERTIFIED?

Oh dear, and I was thinking you had a modicum of credibility!

Ooops! I think the bunny is going to make you pay for that revelation.O0

 

[Khan]

I think that she is right, but has reached the wrong conclusions. This is inevitable given what she does for a living, which is study complicated financial products.

The reality is that many financial products are so convoluted that no normal person has a realistic chance of understanding them. Derivatives are a classic example, as are some of the exotic mortgage securities currently causing so many problems. Some types of futures contracts, private equity, hedge funds and many annuities would also fall into this category IMHO.

However, consider where these product originate: In a substantially fruitless search for alpha or in a search for higher fees (I suspect the actual impetus is split about 50-50 between the two). The risk is not worth the return.

I think what consumers need to be taught is that if they cannot understand it, they should not be investing in it. The actual chance of gaining any alpha is small or zero (I personally believe it is larger than zero for specific products, but below zero for the group. Good luck finding the one that is greater than zero.) Additionally, the vast majority of financial planners (using the broadest definition) do not understand these product either.

Thus, I think that consumers need to be taught KISS (Keep it Simple, Stupid), and to avoid these products like the plague that they are. Am I wrong?

"Employees and retires all over the land:
Don't invest in what you can't understand."

 

[FinanceDude]

You mean you're not even CERTIFIED?

Oh dear, and I was thinking you had a modicum of credibility!

Well, we ALL KNOW about the following:

Certified used GM car
Certified ground beef
Certified produce from foreign countries
Certified mail (who wants to get that usually?)

Are you sure I should be certified? Maybe it's the kiss of death.

Don't worry, I have my MD, phD, MBA, and MS from The Central College of Easter Island all hanging on my office walls.........

I'm thinking about giving back that Finance degree though, since I am obviously underemployed...........

 

[FinanceDude]

Ooops! I think the bunny is going to make you pay for that revelation.O0

Either PAY the bunny, or the bunny will MAKE you PAY.........

20 lbs of COSTCO bacon sent off to him today, it's a small price to pay...........

 

[cute fuzzy bunny]

I hope theres a little ice in the box

BTW, my vanguard funds just fooled around with your american funds girlfriend.

 

[CCdaCE]

Q. But aren't basics such as budgeting always applicable?
A. Teaching them is a waste of money
Quote:
Q. Should parents stop teaching their kids about money?
A. Of course not, especially when it comes to day-to-day spending choices.

Color me confused!

Kiyosaki have a sister?

-CC

 

[Bultacoman]

"Employees and retires all over the land:
Don't invest in what you can't understand."

For finances and money are beyond your command
Your money they're rapidly losin'
Get out of the way if you can't comprehend
For the FAs they are a boozin'

Jeff

Sorry to Dylan and all of you, I'm on vacation!

 

[2B]

Consider the source -- Money Magazine.

I really liked this:

Financial literacy classes give people the illusion that they can successfully manage their finances. So rather than seek help, they end up making worse decisions.

 

[Finance Dave]

Big idea: Why you can't teach money - Aug. 26, 2008

Is she on something? She is basically saying that finances nowadays is too complicated, so we should all just hire a financial planner - but not trust the FP.

To me, that's like saying that too many things I eat can cause cancer, so I am just not going to eat.

Anyone else feel the same as me?

Wow, I'm really rolling my eyes here. On some things I totally agree with her, like this statement...
"try to get everyone to understand that the people selling you financial products often don't have your best interests at heart."

But on other things I totally disagree, such as getting regulators involved. Sorry, but thinking that Congress can solve our problems just makes me angry...look at what they've done with so many other things in our country, such as the way they run our budget on a deficit every year...if I did that with my personal accounts I'd be called a deadbeat and be forced to file bankruptcy.

I think if people understand that the agencies/people you are working with are NOT in it for your best interest, but rather their own...it gives you a place from which to analyze their motivations and therefore ask the right questions.

I agree that not everyone can be a financial planner or tax advisor, it's too complex. But I think we can all learn 20% of the knowledge that will apply 80% of the time...then we must know when to ask for help from those experts for the other 20%. And when you do get help, trust but verify everything they say and do. Get two opinions and compare them. Check to see if your planner/agent is certified or whether they have lawsuits pending. Ask friends who they've used and if they are happy. If an agent promises you something, ask them to put it in writing and sign it.

Dave

 

[Finance Dave]

Yeah, but it was a NICE waterfall. Professional athletes are some of the WORST investors I have ever seen. His agent kept calling me and asking for "stock tips", but never gave me any money to invest...........

Was he a good player? Charge him by the RBI.

 

[Finance Dave]

Well, we ALL KNOW about the following:

Certified used GM car
Certified ground beef
Certified produce from foreign countries
Certified mail (who wants to get that usually?)

Are you sure I should be certified? Maybe it's the kiss of death.

Don't worry, I have my MD, phD, MBA, and MS from The Central College of Easter Island all hanging on my office walls.........

I'm thinking about giving back that Finance degree though, since I am obviously underemployed...........

I see certification as nice, but not foolproof. I'm certified in accounting, and I guarantee you that no one could just walk into those tests (4 of them) with no accounting training and pass them. I've seen the CFP test (considered taking it), and there's no way IMO that someone with no knowledge of personal finance could pass it.

I was also at one time ASE certified to work on cars, same thoughts as above.

Now on the other hand, just having a CFP does not make you a great advisor.

I guess what I'm saying is that certification is ONE indicator of knowledge and dedication to the field.

 

[FinanceDude]

I see certification as nice, but not foolproof. I'm certified in accounting, and I guarantee you that no one could just walk into those tests (4 of them) with no accounting training and pass them. I've seen the CFP test (considered taking it), and there's no way IMO that someone with no knowledge of personal finance could pass it.

My wife sat for the CMA exam, that wasn't a piece of cake either.......

Now on the other hand, just having a CFP does not make you a great advisor.

I guess what I'm saying is that certification is ONE indicator of knowledge and dedication to the field.

I would agree. A know a fair number of advisors that have college degrees in history, or education, even philosophy. A certification like the CFP would force them to learn finance concepts they would need to advise clients.

I have a degree in finance, and a concentration in risk management and insurance. The CFP Board allows you to "test out" of up to 2 modules of the CFP exam if you have the coursework background to support it, which I qualified for. So for me, it's now the commitment to learn a bunch of facts, some useful, some inane, and take the test. I plan on taking it in 2009.

 

[FinanceDude]

Was he a good player? Charge him by the RBI.

I think innings pitched or strikeouts would have been better........

I'd go into more details, but you guys would figure it out, so I'll leave it at that........

 

[Finance Dave]

My wife sat for the CMA exam, that wasn't a piece of cake either.......


I have a degree in finance, and a concentration in risk management and insurance. The CFP Board allows you to "test out" of up to 2 modules of the CFP exam if you have the coursework background to support it, which I qualified for. So for me, it's now the commitment to learn a bunch of facts, some useful, some inane, and take the test. I plan on taking it in 2009.

The CMA is what I have.

As for the CFP, I may someday take it and start a second career as a planner. If I get demotivated, I may just try paraplanner (glorified Excel user) first.

 

[FinanceDude]

The CMA is what I have.

As for the CFP, I may someday take it and start a second career as a planner. If I get demotivated, I may just try paraplanner (glorified Excel user) first.

paraplanner sucks as a job. American Express Financial Advisors tried to hire me back in 98 to be one for them, and 'work my way up" from there, but the pay was quite weak...........

 

[cute fuzzy bunny]

Did he have a hot dog named after him?

 

[Finance Dave]

paraplanner sucks as a job. American Express Financial Advisors tried to hire me back in 98 to be one for them, and 'work my way up" from there, but the pay was quite weak...........

I know, but this would be a "rehirement" job for me...I don't care if I make minimum wage....so long as I can have some fun. Perhaps it's no fun either.

 

[friar1610]

Big idea: Why you can't teach money - Aug. 26, 2008

Is she on something?

NO! The way to learn financial planning is not from a community college or any other kind of class. The way to learn it is, first, to be motivated by a financial goal (such as FIRE, getting the best deal on a mortgage, getting the most financial aid you can when your kid goes to college, etc.) and then go out and learn it on your own - read books, go on the web, get involved in chat boards where people kick ideas around, talk to friends who have "been there, done that". I feel that right now I know all I want/need to know about finances. I never took a personal finance course but, over the years, I've done weird things like read insurance policies, read the prospectuses from mutual funds, put together spread sheets (even before the days of PC's!), read every book I could get my hands on re: Early Retirement. As I get older, I'll probably study up on CCRC (Continuing Care Retirement Communities.) I probably won't want to go into one, but I would like to know the finances of how they work so that if I ever visit one for a marketing visit, I'll have done my homework. A strong desire to avoid getting screwed is a great motivator to learn!

 

[Midpack]

Just more evidence how generic and useless Money magazine is - though evidently it's the most widely read "money" magazine which ironically helps support her premise...

 

[Sarah in SC]

We call it money porn magazine around the office.

 

[Gardnr]

Just more evidence how generic and useless Money magazine is - though evidently it's the most widely read "money" magazine which ironically helps support her premise...

Ain't that the truth!

 

[friar1610]

Just more evidence how generic and useless Money magazine is - though evidently it's the most widely read "money" magazine which ironically helps support her premise...

I've subscribed to Money for a year at a time on a few occasions (especially when I could get it for the corporate/senior/military or whatever rate of $10/year that they seem to offer everyone now.) My take is that they have about 20 - 30 basic articles which they recycle over the course of a 12 - 18 month period.

I'll grant you that the ups and downs of the market can be "news" for some people and there are cycles, bubbles and other events that can make for splashy cover articles. But the fundamentals of financial planning are pretty basic and rarely change. So Money is challenged to make old basic principles and common sense sound new and exciting every month.

I haven't subscribed for quite a few years; I used to skim it in the library before I moved to our small town in Vermont. Our library here doesn't subscribe to it, perhaps demonstrating Yankee common sense and frugality.

 

[harley]

I agree about the recirculating articles, I could write a number of them myself by now.

However, I still enjoy reading them (money and kiplingers and smart money and others). Of course, I also like Louis Lamour westerns.

And every once in a while I even learn something from one of them. Just today I was reading a Kiplingers and I learned that the gov't is removing the tax break of selling your primary residence, taking the (up to) $500K tax break, moving into your vacation home as your primary residence, and eventually selling that one and taking the whole tax break again. Now they are prorating the break (starting from 2008 ). So if you already own your second home and move into it in 2013 and live there until 2018 then sell it, you will only get 1/2 of the tax break.

I didn't know this until I read it, and since I'm buying a second home at the end of Sept, it gives me something to think about. It won't change my mind, but it does prove that even money porn has redeeming values if you don't just look at the pictures.