What is the worst financial advice you have received?


Thinks s/he gets paid by the post
Jul 26, 2007
What is the worst financial advice you have ever received, whether it be a friend, family member, or professional?

When I started working and saving for retirement, a lady who worked in a bank advised me to never put money into anything that was not FDIC insured. Coincidentally, she just happened to be in the business of selling US Treasury bonds and treasuries.:D
Probably from my dad.

1. Never save more than 17.5% of your income or the government will take the rest (not sure where that came from)
2. Never give up your mortgage because you can always use the tax break
Sign up with Ameriprise. "They'll help you get to retirement quicker."

advice from a trusted manager at one of my former companies.
A close friend of mine who retired from a major oil company a few years ago gave me his FA's name and phone number to call and inquire about a variable annuity he purchased. Said it was "guaranteed to never pay less than 6% even if the market tanks". :facepalm:
"You should invest in a variable annuity in your IRA" - Ameriprise financial advisor.
Buying 'penny stocks' off the 'pink sheets'. One hot tip went up 50+%, then suddenly crashed on news of accounting irregularities. Trading was halted for a time and I had to sell out at 95% loss. Painful lesson indeed :(
Fortunately that was decades ago and the $$ involved was small.
Don't contribute to the company pension. I waited 10 years to contribute and it costs me about $20K per year now.
"Don't cancel your cash-value life insurance policy and put the proceeds into no-load equity mutual-funds" (early 1990s).

The only meaningful financial advice I've ever been given comes from books on personal finance. I judge that there was more good than bad in all of the books I've read, but there certainly was a lot of bad in the worst of them. The first, and probably worst, financial book I read was by Venita Van Caspel. She mixed sound, sensible investment advice with some really peculiar personal biases. She loved stocks, but hated bonds and openingly ridiculed clients who kept money in a cash reserve. So from that perspective she was advocating that everyone have a 100% all stock portfolio. But she also believed in paying the overhead of hiring a professional market timing service to "protect" one's portfolio against adverse market conditions. So a literal interpretation of what she wrote is that you're an idiot if you're not 100% invested in the stock market, unless of course you should be 100% on the sidelines in cash. In her world, balanced portfolios and diversification were for wimps.
In my 20's, the mantra was "You gotta buy a house as soon as possible. They aren't making any more land! Houses only go up in value!" Worst advice I ever went without comforts for years and years to heed.

Almost anyone can beat index funds- just buy the latest (hot) stock.
1) You have to buy a home, paying rent is throwing away money. The pressure from family and coworkers to buy was intense, whichj thankfully we resisted.

2) It doesn't make sense to save when inflation is high. Inflation hurts, but I always saw this as mostly a rationalization to spend and consume.
Oh - here's another:
You need to be out of the market when you retire. You should have your money secure in CDs and government bonds.
Don't invest in 529 plans and sell all you've - Friend and a Relative who thought I was nuts in putting money away in 529.
Back in my early 20's a broker friend of one of my brothers convinced me to buy a "can't miss stock whose price is sue to double in 6 months". After six months I had lost 75% of my fortunately small investment. When I decided to close out he then tried to convince me of another "sure to double in six months" stock. When he started including statements like "stocks do well when an NFC team wins the Super Bowl", I knew I had to run far, far way from him. I chalk up my loss as "tuition" to start learning about stock investing.

When 401Ks became available at Megacorp, I listened to my peers and didn't invest right away, due to comments such as "the money isn't going to be worth all that much 30 years from now" and "you have a pension, you don't need a 401K". It took a couple of older co-workers bugging me daily for a more than a year before I opened one.
Invest with xyz mutal fund, there so good you'll make up the 5% front end load in no time.
Sign up with Ameriprise. "They'll help you get to retirement quicker."

advice from a trusted manager at one of my former companies.

Actually Ameriprise (well, its predecessor IDS) did help me significantly in getting to FIRE due to results I got starting with them about 40 years ago.

I'll have to tell the story here some time. I haven't because I don't think people could read it without getting emotional about today's "Ameriprise."
Pink sheets
Limited partnerships
Mutual funds
Private equity
Real estate
Profit-taking on stock sale

I have tried them all at various times in the 70s/80s, losing money at times. Fortunately, it was before I had serious money to invest. I made money on some of them BUT the advice was always bad for self-serving reasons. It is possible to make money in all these ways, but you have to work at each one.
Always borrow money to buy a car, it's never worth paying cash for a depreciating asset.
Keep all your TSP money in the "G" fund, because it'll never lose money, like the stock funds do. You may not make as much, but you'll never lose any either.

That's what an old supervisor told me. And that's where he kept his money. I'm glad I'm not such a good listener.....
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1- leveraging is how you make money

2-UBS had an investment account back in 2007 with 50% REITs. . .ugh.

3-20% ROR is reasonable. Don't worry.

4- Having a partner diversifies your risk (that partner walked and owes me $100k).
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