Help on Scary personal finance subjects

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Allan Roth
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Help on Scary personal finance subjects

Post by Allan Roth »

I hope this post is appropriate, but I'd love some help from the brilliant people on this forum on a column I'm working on for CBS MoneyWatch. It's a Halloween story on the five scariest things on personal finance.

I'd love any candidates you all could suggest. They don't have to be investment related, just personal finance related. For example, one might be "the most expensive way to buy a house is with cash. Debt is your friend and you should take out the largest loan you can and pay it back as slowly as possible."

This was obviously much bigger a couple of years ago.

Any suggestions will be very much appreciated.

Thanks.

Allan
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Sheepdog
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Post by Sheepdog »

Investing in a can't lose opportunity.
My close friend comes up to me and says, "Hi Jim, I have a friend I would like you to meet. His name is Bernard Madoff, or as his friends call him, B.M. I have all of my retirement funds invested with him. He guarantees a minimum of 15% per year and I have been getting it for two years. As a friend of mine, he will let you in on it. You can't lose. You are very lucky to be asked to join with us on this incredible opportunity."
Jim
All that truly matters in the end is that you loved.
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bob90245
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Post by bob90245 »

While the exact rankings change slightly from year to year, the following is a list of America's most common fears.* See if one or more of your fears are on the list.

1. Snakes - 51%

2. Speaking in public - 40%

3. Heights - 36%

4. Being closed in a small space - 34%

5. Spiders and insects - 27%

6. Needles and getting shots - 21%

7. Mice - 20%

8. Flying on a plane - 18%

9. Dogs (sorry, Lassie) - 11%

9. Thunder and lightning - 11%

9. Crowds - 11%

10. Going to the doctor - 9%

* Gallup Poll, February 18-21, 2001 (1,016 respondents; + or - 3%)
Source: http://www.faceyourfearstoday.com/Top_10_Fears.html

Personal Finance topics didn't crack the top ten list of fears. :D


P.S. Does going to the dentist count the same as going to the doctor? I was surprised that death and taxes didn't make the top 10 list. Those two might make for a personal finance subject. :D
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
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Crystal Ball
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Scary advice or CW

Post by Crystal Ball »

It sounds like you're asking for scary advice or conventional wisdom.

Two of my favorites:

"You have to buy a house because all the money you are spending on rent is wasted."
I always wonder what they think happens to the interest they spend on a 0% down mortagage.


"You don't need flood insurance"
Usually quoted by realtors when what they should say is "The bank doesn't require flood insurance"
Every flood brings out the whiners who don't have insurance and want a bailout because "They said we didn't need it."
mfen
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Post by mfen »

1)Investment advice over a free steak dinner.
2)Insurance rep/Investment advisor: "I will bring the papers over to your house" (Maryanne's rule #1: never let the banker in the door)
3)No money down.
4) Guaranteed to make X% a year. Usually prefaced with "why are you still investing in stocks, bonds and mutual funds?"
5) The world is coming to an end buy gold, guns and non-hybridized seeds.
6) Only $19.95 a month, maybe I am out of touch, it could be only $29.95 a month.
Maryanne
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Sheepdog
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Post by Sheepdog »

You must show loyalty in your company. Your boss is looking at how loyal you are. You should put all of your savings in your company stock.

You are planning on retiring in 5 years, but you haven't saved enough so you catch up by having 100% in stocks.

Your wife says "I made us a lot of money shopping today"
Last edited by Sheepdog on Fri Sep 25, 2009 10:38 am, edited 1 time in total.
All that truly matters in the end is that you loved.
Polaris
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Post by Polaris »

How about the hubris of money managers who delude themselves into thinking they're smarter than everyone else?

I find statements like this pretty scary (source):
Andrew Feinberg wrote:I regularly trounce the market. So does my brother, who co-manages Clipper and Selected American Shares funds. So do some friends and dozens of professional acquaintances. I find it very easy to select fund managers who will beat the market consistently.
Of course, that was inevitibly followed up about three years later by this (source):
Andrew Feinberg wrote:I used to think I was pretty smart, but I don't feel so smart anymore. If Alexander Pope were still around, he would have found a place for me in The Dunciad, his mock-epic satirical poem. I want to have a good year in 2009 not just because I have to save my business, but because I'd like to recapture the feeling that my brain works at least some of the time.
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Sheepdog
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Post by Sheepdog »

[political comments removed by admin alex]
All that truly matters in the end is that you loved.
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HueyLD
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Post by HueyLD »

From one of the well known advisors in town:
You are invited to an exclusive dinner seminar (at one of the most exclusive restaurants) and nothing will be sold at the seminar. However, you must have at least $500,000 worth of investable assets to attend.

From an insurance/annuity salesman (a/k/a financial advisor) ad:
Variable annuities are terrible investments for you and I have a product that guarantees that you will never lose a dime (i.e., equity indexed annuity).

From a real estate agent:
If you don't buy it today, the house won't be available tomorrow.
Topic Author
Allan Roth
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Post by Allan Roth »

Wow - these are great comments.

By the way, my largest two fears were public speaking and going to the dentist. I got over the public speaking one. One out of two isn't bad, is it?
InvestingMom
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Post by InvestingMom »

Internet (or any) scams on your aging parents.
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bottlecap
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Post by bottlecap »

The scariest thing I can think of nowadays would be borrowing from your 401k Plan in this economy (up to 50% of the balance or $50,000), losing your job and then realizing you have to pay the loan balance in 30 to 90 days, or be taxed on the amount as income AND pay a 10% penalty for an early withdrawal. Did I mention you were jobless? Yikes!

JT
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bobcat2
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Time Horizon

Post by bobcat2 »

Time horizon. The more time you have until you’ll need your money, the greater your ability to weather short-term declines in the prices of your holdings. So if your time horizon is at least ten years, emphasizing stocks in your investment program may help you achieve your financial goals more readily.
-Above is a quote from a Vanguard web page for investor education.

Link to article using above quote. (The quote is on 2nd page of article.)
http://docs.google.com/gview?a=v&q=cach ... F77lzu2I0g

And this is the advice from the good guys. :roll:

Bob K
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
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Quasimodo
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Post by Quasimodo »

"Shop for the cheapest insurance you can find, because it's just a commodity." (bad advice, in my opinion)

John
Last edited by Quasimodo on Fri Sep 25, 2009 11:24 am, edited 1 time in total.
Many wealthy people are little more than janitors of their possessions. | | Frank Lloyd Wright, architect (1867-1959)
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BruceM
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Re: Help on Scary personal finance subjects

Post by BruceM »

Allan Roth wrote:I hope this post is appropriate, but I'd love some help from the brilliant people on this forum on a column I'm working on for CBS MoneyWatch. It's a Halloween story on the five scariest things on personal finance.

A full page ad in the Oregonian two years ago that shouted...

"GET RICH IN REAL ESTATE! WHY BE LEFT OUT WHEN OTHERS ARE MAKING MILLIONS!!" and then went on with testimonial after testimonial from 'regular' working people.

But to me, one of the financially scariest situations is the Merrill Lynch OnLine web site that begins with...

Start with a professional and trained Financial Advisor
who understands your personal financial needs.


Utterly horrifying!!

BruceM
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bob90245
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Post by bob90245 »

Not that this has happened to any one here. But some investors got scared out of stocks near the bear market lows (they reached the "Get Me Out" Point -- GMO Point). And now they're scared to back into stocks again because prices are now much higher.
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
GammaPoint
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Post by GammaPoint »

If you're looking up what an 'option' is on wikipedia in the same month that you start to use them, that's scary.
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gotherelate
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Post by gotherelate »

Yesterday I got a call from our credit card company asking us if we had made some charges on our credit card. We didn't recognize any of them. They cancelled the card and will reissue a new one. Both of us (my wife and I) had our credit cards in our possession. Somehow someone got our credit card number and used it for several purchases. Now I'm having second thoughts about even using credit cards again. In fact, now I'm wondering about the safety of banking and investing on line. Yikes! :shock:

-Grandpa
-Grandpa | I'd rather see where I'm going than see where I've been.
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ObliviousInvestor
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Post by ObliviousInvestor »

People on their second (or third) marriage but first IRA beneficiary.

The advice that "a Roth is always better than a traditional IRA because it's tax-free instead of just tax-deferred."

Picking mutual funds based entirely past performance.
Mike Piper | Roth is a name, not an acronym.
InvestingMom
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Post by InvestingMom »

ObliviousInvestor wrote:People on their second (or third) marriage but first IRA beneficiary.
That is so funny. After I was married a couple of years I realized that I still had my old boyfriend listed as a beneficiary on an IRA. Wow did I change that quickly (and as quietly as possible.)
JasonR
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Post by JasonR »

InvestingMom wrote:Internet (or any) scams on your aging parents.
+1. Alas, my aged parents/inlaws have all managed to severly damage their finances as they've aged. Get-rich quick scams have taken the greatest toll (as in buying commercial real estate at the height of the bubble), followed by life insurance/variable annuity salesmen.
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Sheepdog
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Post by Sheepdog »

Sheepdog wrote:[political comments removed by admin alex]
Alex,
Out of curiosity, what did I say that was political? It certainly wasn't supposed to be. Please PM to write what I said that you thought was. Thanks.
Jim
All that truly matters in the end is that you loved.
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G12
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Post by G12 »

"You don't need flood insurance"
Usually quoted by realtors when what they should say is "The bank doesn't require flood insurance"
Every flood brings out the whiners who don't have insurance and want a bailout because "They said we didn't need it."
I'll second this. Like the flooding in Austell, GA this week, the area flooded no more than 3-years ago due to heavy rains and > 90% of the current claims are not covered by flood insurance. It's like relying upon a Realtor believing they have your best interest at heart, or outdated 100-year flood plain maps. For very minimal cost homeowners choose not to insure what is typically the most valuable asset they own? I feel sorry for the homeowners, but the evidence of need was right in front of them.
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gatorking
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Gold

Post by gatorking »

Just saw this on TV - "Buy gold, because it's value will never go down to zero."
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simplesimon
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Post by simplesimon »

Social security will always be there.
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NightOwl
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Post by NightOwl »

Basing spending decisions on gross, not net, income. For instance, a $x/hour worker looks at something costing $x and says "whatever, that's only one hour of my time." I hear that one a lot.

NightOwl
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fluffyistaken
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Post by fluffyistaken »

Buying a timeshare direct from the timeshare company...

... and the stock equivalent of the above:

Taking part in an IPO where the company is "generously extending the opportunity directly to our loyal customers/employees/general public/suckers to participate in our IPO" (i.e. investment bankers don't want to touch it at that price; see Vonage)
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mas
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Post by mas »

Debt collectors & identity theft
pshonore
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Post by pshonore »

gotherelate wrote:Yesterday I got a call from our credit card company asking us if we had made some charges on our credit card. We didn't recognize any of them. They cancelled the card and will reissue a new one. Both of us (my wife and I) had our credit cards in our possession. Somehow someone got our credit card number and used it for several purchases. Now I'm having second thoughts about even using credit cards again. In fact, now I'm wondering about the safety of banking and investing on line. Yikes! :shock:

-Grandpa
That happened to me twice this past Spring (with the same card). Only thing I can think of was I had automatic bill payment (Cable, EZPass, Netflix, etc) using that card and perhaps one of those processors was not "secure". I was surprised when they called because the suspect charges were relatively small. Then again you can use a card in the Mall and if someone is intercepting unencrypted transmissions of card data in the parking lot, your card info is right there. 60 Minutes did a big story on that a while back.
sommerfeld
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Re: Scary advice or CW

Post by sommerfeld »

Crystal Ball wrote:Every flood brings out the whiners who don't have insurance and want a bailout because "They said we didn't need it."
"here's a bucket. start bailing..."
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CABob
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Post by CABob »

A couple of prior replies reminded me ...

I had been married for over 20 years when I discovered that I had forgotten to update beneficiary to an insurance policy.

Recently, my wife went to get something out of her purse and realized that a wallet she normally carried was not there. After searching the house and car and trying to remember where she might have taken it out and forgot to replace it we realized that we should report the missing credit cards. She last had the wallet when she checked out of the grocery store about 2:00 on a Thursday afternoon and discovered the loss about 11:00 am on Friday and started to call credit card issuers. In less than 24 hours about $1500 had been charged to three credit cards.
As near as we can determne it would appear that someone had lifted the wallet out of the purse or perhaps she had dropped it somewhere and it was found by someone who was not the type to turn it in to the store.
Moral of the story -- ladies, keep an eye on your purse.
Bob
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bob90245
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Post by bob90245 »

You're a parent and receive the following letter from your child's school:

"As part of our personal finance curriculum, your son or daughter will be learning about investing through their participation in the Stock Market Game."

:shock:
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.
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Steelersfan
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Post by Steelersfan »

This thread covers a topic that's pretty scary to me, not for my parents, but for myself as I age - loss of mental capacity to manage my financial affairs:

http://www.bogleheads.org/forum/viewtop ... ht=parents
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Taz
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Post by Taz »

"Buying a mutual fund through a 15 year contractual purchase plan and playing 50% of your first year investments as a front-end load ensures that you and the other investors stay committed to long-term investing and dollar cost averaging." Advice from a financial advisor.
The destination matters.
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Post by Faith20879 »

I have one! I have one! Pick me! Pick me!

T's the year of 2000 every body was making a killing in the dot.com. My cousin told me that I needed to make my money work for me so she gave me a name of a broker (with a big brokerage house) that she trusted. He opened an Roth account for me and put my $3000 in a class A share fund that invested in the hottest companies (paraphrasing in his word). By the end of 2001, my $ had shrunk to less than $1000. In panic, I got him on the phone. He calmly put me into a "better" fund that was also of class A. By 2002 I have read enough about this diehard group on Morningstar that I wanted out. My account balance was about $60 plus some cents then. When I told him I was going to transfer my account to Vanguard, he said that's fine but closing my account would cost me no more no less - $60.00.

Ever since then, every time I hear the name of this company I break out a full body of cold sweat. Is that scary enough for you?

Regards,
Faith
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DiscoBunny1979
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Post by DiscoBunny1979 »

This real estate situation has been the most scarey for me over the past year:

A neighbor of mine that's a Veteran says he bought a house using VA financing for about 100% of the appraised value. However, since the sellers wanted 30K more than appraised value (listed at $270K butt appraised for $240K), they did a second with the sellers by putting up a piece of property as colleteral valued at the difference.

The scarey part - I phoned the VA asking them about VA financing. They said. . . "the VA only cares about the 1st mortgage they have on the property. The veteran can get as many loans against the property as they want and we only care about our loan. The VA often appraises property for less than market value and the veteran often has to make up the difference."

This is why we have the financial mortgage mess we do. The government isn't looking after our Veterans, granting with almost 100% financing, and does not care if there are 2nds or 3rd or 4ths taken out at the same time on the same piece of property - making the veteran instantly underwater.
Last edited by DiscoBunny1979 on Fri Sep 25, 2009 3:34 pm, edited 2 times in total.
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cinghiale
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Post by cinghiale »

I do not qualify as a judge of which one of these (thus far) is the scariest, but when it comes time to pick "win," "place," and "show," I expect to see Faith somewhere there in the winner's circle.

That's a "Boglehead Maker" kind of story.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell
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spam
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Post by spam »

Frankly, I feel that EMH and its practical application is the mother of all investment fear. A 30 year roll of the dice that has profound implications.
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HardKnocker
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Post by HardKnocker »

Your girlfriend says:

"Sweetheart, I'm late this month."
catchup
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Post by catchup »

Maybe you could use that list of America's top fears and turn it toward finance, i.e.

1. Snakes: Bernie Madoff, Sanford, etc.

2. Speaking in public: public disclosure, exposure of finances such as a tax audit...

3. Heights: The higher you climb, the harder you fall, housing bubbles, dot com booms...

4. Being enclosed in a small space: lack of diversity, all of your eggs in one basket.

5. going to the doctor (accountant, taxes?)

Anyway, just a thought. I'm sure it will be an interesting column.
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schnoodlemom
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Post by schnoodlemom »

True confession: For us the scariest thing has been a "set it and forget it" mentality, not to be confused with "stay the course". In 2008 as long time savers, but still novice DIY investors, we were shocked to realize that we had way too much equity exposure and hadn't yet learned to properly allocate assets for our time horizon and risk tolerance. Have to learn the hard way sometimes. Amanda
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Dan Moroboshi
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Post by Dan Moroboshi »

The initial shock of calculating the size of the nest egg I'd need to fund my desired retirement income was pretty darn scary - "I'm gonna need THAT MUCH?!"

Devising a plan to achieve that goal was also pretty scary - "I'm gonna have to save HOW MUCH per year?"

Discovering the extent to which the financial industry siphons off investors' returns is somewhat scary ("A Nightmare On Wall Street"?) but is probably more infuriating than anything else.
Trev H
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Post by Trev H »

How about this one ???

TSM is all you really need !

:-)
Mitchell777
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Post by Mitchell777 »

Go see my financial advisor Ray. He does not charge anything and every year he takes us out to an expensive dinner
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Post by ObliviousInvestor »

Mitchell777 wrote:Go see my financial advisor Ray. He does not charge anything and every year he takes us out to an expensive dinner
Ooooooh that one's good. Or it's closely-related, "all they charge is $40 per year for an IRA!"
Mike Piper | Roth is a name, not an acronym.
mfen
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Post by mfen »

Just got one of these emails: Hurry! Get $100 to sign up - for a 3 year contract at just $99.95 a month. Wow, what a deal.
Maryanne
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RJB
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Post by RJB »

Sales Persons talking.
Saying things like this is a good opportunity. They never disclose its a good opportunity for them and their company...
Saying things like real estate always goes up...
Saying things like sign here.
Saying thinks like "If I knew you were going to read every word, I would have given you copies of the contracts the day before. So I replied back, if I would have know that was an option, I would have asked for them. That actually happened at my last closing. I made them wait until I read and understood every word in all of the contracts. Home closings can be very scary for first time home buyers.

Roy
Last edited by RJB on Fri Sep 25, 2009 5:53 pm, edited 1 time in total.
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Post by bearcub »

Your company sends out a memo---- your pension has been frozen. Oh yeah, we will no longer be matching any of your 401k contributions.
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RJB
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Post by RJB »

You boss calls you into a meeting to tell you there is a merger currently being announced and ....
This usually leads to layoffs and financial difficulties.
Last edited by RJB on Fri Sep 25, 2009 6:14 pm, edited 1 time in total.
TwoCyclists
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Post by TwoCyclists »

I'm a little surprised at these responses to the call for
scary topics in personal finance. Everyone is joking about the usual practices that Bogleheads disdain. But not long ago, we were
genuinely afraid -- we saw share prices of the top financial institutions in the US and the world drop to unbelievable levels never before seen, we saw a money market fund break and a stampede toward Treasury-backed MM funds, we saw no place to hide as entire countries defaulted and US Treasuries have been called the next big bubble.
It was scary to see that in this very forum many of the "brilliant minds" were engaged in miles-long market timing threads, comparing the worth of different augurs for buying and selling.

This forum is a source of information and advice about the principles of personal finance. It was scary to see how little guidance the principles seemed to give -- !
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