Those events have a way of sweeping people up in emotional moments and sweet-talking them out of their money. Thank you for the objective advice and explaining some of the complexities. I'd never heard of call options!
Beware the “Get Motivated Tour” Scam
You’ve probably seen the billboards; Rudi Guiliani, Colin Powell, Bill Cosby; unique stars in each city. It’s the guys you don’t see that make this a scam. Take a tip from an old stock broker; leave your VISA at home
If the tour was named “Invest in our Get Rich Quick Methods”, then it wouldn’t be a scam. Don’t get me wrong. I thoroughly enjoyed hearing each of the famous people listed above, and I did get motivated to do more with my life. What I wasn’t expecting were slick pitches on investment products.
On average, each star spoke for about 20 minutes. Sandwiched in between them were four Investment Advisors (I use that term with much reservation) who spoke for over 45 minutes each about their fantastic systems to make you rich. This is what made me so mad. The stars pump you up to fall into a trap. The purpose of this article is to brush away the bamboo leaves and give you a little sound investment advice.
These “advisors” had great pitches. They were funny, well-spoken, and all mentioned their Christian beliefs often (this also burned me up.) I’m sure they swayed a great deal of the audience into considering buying their services. There was a real estate guy, an Internet guy, someone else (I don’t remember his scheme) and a stock market guy. It’s the last guy who is in the gun sight of this article.
I ran into someone at my gym the next day who was about to send the stock guy a check. She completely bought into the spiel of this shyster. I asked her what she liked most about him. Her reply was: (a) his method seems so fool-proof (b) his Christian beliefs, and (c) how much he wanted to help people. I smiled and asked “if his method is fool-proof, he should be as rich as Bill Gates or Oprah; and if he truly just wanted to help people, why doesn’t he just give his methods away for free?” She simply looked at me with a light bulb going off expression.
I’ve actually seen infomercials where the pitchman gets lobbed that question & they do have a pat answer: “you wouldn’t think it was worth anything if it were free.” I love these guys. They have all the answers. Oh well, off my soap box and on to the advice. It’s free, and I really do want to help you.
Each section will have a full length article in the coming months. Here's what you need to know to get started. The first bullet point is the longest here because I feel it is the most important.
A) Make your own Decisions & take Responsibility for your Portfolio
First Question: Do you have to be invested in the stock market? My answer is no. Sure, you hardly get any interest from the banks on savings accounts at this moment in time, but the FDIC guarantees you’re not going to lose that hard earned green.
Second Question: Should you be invested in the market? My answer is yes, after you understand a few basics and the risk involved. This first section is basically trying to get you to realize that while investing can be complicated; you can do it yourself successfully.
Sure, consult with a broker or friends about investments and learn as much as you can, but in the end make your own decisions. I believe this is a proper principle that applies to life in general. Don’t blame others for your situation. It will also be so much more rewarding when you succeed. If you’re just beginning to invest, you probably should work with a broker or advisor for one-on-one mentoring, but still always trust your gut when placing a buy order.
No one knows for sure what the market or any individual stock is going to do. Also, if by chance someone did, they would certainly be smart enough not to tell anyone else their secret. Would you advertise the location of the goose that lays golden eggs? No; that would mean less egg for you. The stock stud showed graphs with big green UP arrows, and red DOWN arrows. These were supposed to tell you when to buy and sell a stock. All show. It’s easy to create a chart that ‘proves’ your system. You simply use only stocks that your system worked during a given timeframe, and hide/ignore stocks that didn’t.
In any given year, very few advisors offer strategies that greatly outperform the market in general. You have just as much chance as the ‘pros’ do in being right. And only you know yourself and how you feel about taking risks. Only one of the money-men mentioned risk.
He proclaimed ‘You take a risk getting out of bed in the morning.’ Not the same thing, dude. You have to get out of bed. You do not have to invest in the market.
Most of you have heard of Dave Ramsey. He has helped a tremendous amount of people get out of debt & I really like this guy (who happens to base his office in my hometown of Nashville, TN.) Yet, I feel his investment advice is horrible; he tells everyone “Spread your investments across 4 major areas of mutual funds. Historically, you have to be invested in the stock market to build wealth.” I actually do not disagree with that. What I disagree vehemently with is giving that advice to people he has not sat down with and learned about their personal risk aversion. If you cannot sleep at night because of daily, weekly or quarterly losses in your portfolio, you need to adjust to be more conservative, even if that means a 100% money market account.
B) Read Cliff Notes pieces from Warren Buffet and others to Build a Core Understanding
Mr Buffet's daughter was actually one of the stars in Nashville (It seemed so out of place that she was on this tour…) and gave the audience her father’s two rules of investing:
1) Don’t Lose Money
2) Remember Rule #1
Does he mean you can never have a trade that goes south? No. I believe the true meaning of rule #1 is the only way to amass wealth via the stock market is to be conservative, balanced and take a long term approach.
You don’t have to read book after book on investing. Start your education by Goggling “Financial Quotes.” My all-time favorite is from Albert Einstein: “The most powerful force in the universe is compound interest.” How is compound interest acquired? It comes from investing in products that pay dividends or interest and then leave them alone.
C) Don’t over trade – Again, Take a Long-Term Approach
Stock brokers make money from commissions: Period! They have a vested interest in moving you in and out of stocks and mutual funds. Be aware of that fact. Even if you trade online, the commissions you pay will add up over time.
D) Don’t jump into complex investment strategies before you fully understand them
One of my most enjoyable moments of the show was when the stock market guy mentioned he was going to tell us a way to make money on the stocks we own even if the market goes down. I turned to my little sister and said “he’s going to talk about selling covered call options.” Bingo! This strategy in itself is not bad, but you have to understand one rule that the presenter never mentioned. If your stock takes a good jump up and you decide to sell, you have to remember to buy back the call option you sold. Without doing that, the stock could really take off up and you’d be out of an untold amount of money.
E) Understand Market Risk & your personal Risk Aversion
Don’t fret about what the DOW does each day. This trap will only make you emotional about your investments. The DOW is going to go up or down, sometimes wildly…. I have one investor with a nice 401K that lost value quarter after quarter over the last two years even though she kept making monthly contributions that were matched by her employer. After hearing the distraught in her voice, I helped her move into a more conservative position (even though I would not have done it myself.) It’s her money and I was not going to try convincing her to take more risk than she was comfortable with.
The overall point of the article is there are no quick methods of getting rich in the stock market, or anything else for that fact. Go see these great speakers, but only use your VISA to buy refreshments.
Learn more about the author, Steve Kozy.
Comment on this article
Posted by JoAnne Dyer, Seattle, Washington |
Sep 07, 2012
Posted by Gerald Grinter, Seattle, Washington |
Sep 13, 2012
Love this article! I went to one of these events once. That's all it took to realize that it's a show to get you hooked on buying their secret sauce. Besides the fact that they are practically giving you the ticket for FREE told me something when I saw it's suggested value. No thanks, I'm good.
Besides, like you said, if their information was so great they would be as rich as Bill and Oprah and they would be household names just like...Bill and Oprah!
Steve's current promotion
Updated Sep 25, 2010
Trash your Vista in Oct
Software Knowledge will be offering free webinars & Nashville open-house parties on Upgrading your Vista PC to Windows 7. It can be done rather easily...[more]
- Fear and Greed
- stock market
Steve's other articles