2 years ago, my wife and I joined a "wealth building club." Each month, we attend a club meeting which features an opportunity to invest in exclusive opportunities, usually related to real estate. Last night, for example, featured a presentation from Canyon Acquisitions, seeking investors for a resort property in Central America. He made a good pitch, saying the "worst case scenario" would be we'd get our money back, plus 7.5% interest/year, if the project fell through. If it goes through (and he saw no reason why it wouldn't), we would double our money in 2 years. The wealth building club leader stoked the audience's enthusiasm, asking things like "How does a 50% rate of return sound to you? And since you're buying land, you own a hard asset, so you're protected, unlike the stock market."
The audience was eating it up. The problem, unfortunately, and the reason for this post, is that my wife was, too.
It is clear to me that if this were really such a great deal, he wouldn't be pitching it to a bunch of financially-inexperienced baby boomers (my wife and I are among the younger members - the majority of the club is older folks). He'd be pitching it to Donald Trump, or people who make their fortunes via real estate. It is also clear to me that the promise of a "50% rate of return per year" is nonsense. But how do I convince my wife of this?
We never fight about money. We have the same goals and are in perfect agreement regarding how much we want to save for our future. This is the first time we are disgreeing on money issues. I strongly believe that we are well on our way to wealth already, and we don't need to risk money at these pie-in-the-sky investment deals. My wife, however, believes the presenter and club leader's promise that these kind of deals are safer than mutual funds, because they're protected by a "hard asset" (the land itself). I disagree. I have no idea how much that land is really worth. We could be buying swampland. I'd never heard of this company before (Canyon Acquisitions). How do I know they're not going to take my money, stick it in a bank in the Cayman Islands, and declare bankruptcy? On the other hand, I'm quite confident that TD Waterhouse is not going to abscond with our brokerage money. My investment approach is to invest in index funds. That's as risky as I'm willing to get, and it's more than enough to get us to our goals.
Last night, after our heated discussion in the car on the way home, she commented that maybe she should read some of the books I've been reading, so she can try and understand where I'm coming from. This was music to my ears - I'd love to be able to talk about this kind of stuff with her. I gave her "Still the Only Investment Guide You'll Ever Need" (by Andrew Tobias) to start her off, as I figured it's a quick, easy read that is pretty comprehensive.
How do I convince my wife that this guy is not being totally honest? How do I convince her that a promise of a "50% return with low risk" is nonsense, when these snake-oil salesmen make such a convincing case? The "wealth club leader" portrays these presentations as though he's vetted them out and is confident they will play a key role in helping us build wealth. I, on the other hand, am thoroughly convinced that these are little more than infomercials, and the presenters are paying a (probably hefty) fee to our "wealth club leader" to have a captive, pre-screened audience of inexperienced investors with substantial pots of money set aside, ready to invest. My wife thinks I'm being too cynical. I'm just trying to protect our money. I recognize that nobody cares more about our money than I do, and these guys are just trying to get a piece of my pie. How do I get my wife to understand my point of view?
The audience was eating it up. The problem, unfortunately, and the reason for this post, is that my wife was, too.
It is clear to me that if this were really such a great deal, he wouldn't be pitching it to a bunch of financially-inexperienced baby boomers (my wife and I are among the younger members - the majority of the club is older folks). He'd be pitching it to Donald Trump, or people who make their fortunes via real estate. It is also clear to me that the promise of a "50% rate of return per year" is nonsense. But how do I convince my wife of this?
We never fight about money. We have the same goals and are in perfect agreement regarding how much we want to save for our future. This is the first time we are disgreeing on money issues. I strongly believe that we are well on our way to wealth already, and we don't need to risk money at these pie-in-the-sky investment deals. My wife, however, believes the presenter and club leader's promise that these kind of deals are safer than mutual funds, because they're protected by a "hard asset" (the land itself). I disagree. I have no idea how much that land is really worth. We could be buying swampland. I'd never heard of this company before (Canyon Acquisitions). How do I know they're not going to take my money, stick it in a bank in the Cayman Islands, and declare bankruptcy? On the other hand, I'm quite confident that TD Waterhouse is not going to abscond with our brokerage money. My investment approach is to invest in index funds. That's as risky as I'm willing to get, and it's more than enough to get us to our goals.
Last night, after our heated discussion in the car on the way home, she commented that maybe she should read some of the books I've been reading, so she can try and understand where I'm coming from. This was music to my ears - I'd love to be able to talk about this kind of stuff with her. I gave her "Still the Only Investment Guide You'll Ever Need" (by Andrew Tobias) to start her off, as I figured it's a quick, easy read that is pretty comprehensive.
How do I convince my wife that this guy is not being totally honest? How do I convince her that a promise of a "50% return with low risk" is nonsense, when these snake-oil salesmen make such a convincing case? The "wealth club leader" portrays these presentations as though he's vetted them out and is confident they will play a key role in helping us build wealth. I, on the other hand, am thoroughly convinced that these are little more than infomercials, and the presenters are paying a (probably hefty) fee to our "wealth club leader" to have a captive, pre-screened audience of inexperienced investors with substantial pots of money set aside, ready to invest. My wife thinks I'm being too cynical. I'm just trying to protect our money. I recognize that nobody cares more about our money than I do, and these guys are just trying to get a piece of my pie. How do I get my wife to understand my point of view?