What do you tell your friends who don't have a clue...

Quote from jnbadger:

I have a couple of friends who make great money as construction contractors, and who follow the market somewhat. One of them gets a couple of news letters every quarter and believes most of what he reads.

My problem is this. This good friend, who calls mortgage brokers WHORES because of the fees they charge, just gave the local Ed Jones rep 3500 bucks to manage his 100K account. He says the guy "guaranteed" him 9 - 12 % / year on his investment. I don't think the guy actually guaranteed that rate of return, but he probably implied it.

My friend says he does homework, but obviously not enough to find out he could just simply buy the Nas, the Dow, or the S&P (He has no idea what the q's diamonds or spyders are). Turns out this guy put him into five stocks. I don't remember which ones specifically, but they were all blue chips which were on the the Ed Jones "Focus List."

I guess the point is this. All I'm trying to tell this guy is that all he has to do is a little more homework and avoid the fees and commissions. Find some discount broker somewhere and buy an index. And he just doesn't get it. He trusts this guy. It's a small town and he goes with the trusted Ed Jones Guy. All I do is drive to the big city, an hour away, every day and trade for a living, so I don't know what the fukk I'm talking about.

It's all probably because his dad has gone to this guy for years and has basically bought every individual stock in the DOW, and paid commissions on each one. He's used to it and is passing it on.

I know some people think I'm over reacting, but I get tired of people getting raped without even knowing it.

So: do you just keep your mouth shut and enjoy your own cheep rates and returns, or do you try to educate thes friends. It seems that educating them just pisses them off.
More...

You're lucky it's just your friends. Things really get sticky when it's your family or in laws. Basically, there are a lot of people with more money than time or inclination to do the research and due diligence necessary to run their own money. They lack the sophistication to use a registered investment advisor, so end up with "financial advisors", aka retail brokers.

The problem is that you really can't help them, not unless you are willing to put your friendship on the line to save them some dough. If you recommend an advisor, heaven help you if he ever has a losing trade because that is all they will remember. They will also assume you got a referral fee and are basically complicit in "robbing" them.

About the most you can do is look over their portfolio to make sure it's not dangerously concnetrated and ask them what they will do if the market declines by 10%. You might also point out that their broker gets extra commish for sticking them in those closed end IPO's that go to immediate discount.
 
If you tell him to buy SPYs and the market tanks you will
probably get the blame for losing him money.

Unless you are prepared to manage money on his behalf
and can garantee his downside then you are only opening
yourself up for being blamed.
 
I have run across this sort of thing too.
I just keep my mouth shut. I find that decisions about money are emotional, not rational for most people.
It is impossible to use logic to persuade when emotion is in charge.
 
Quote from bighog:

Anything, would be better than CNBC. That channel has turned into a constant self promotion. "YOU ARE WATCHING POWER LUNCH" so on and so on. I try to catch some comments but really need to have the mute button on...:D
More...

I agree. CNBC sucks. The only value I seem to get out of it anymore is listening to Squawk Box on XM on the way to work in the morning. Seldom valuable, but if something serious is going on, you're primed for it.

And speaking of CNBC, and in relation to this thread, I've resorted to just nodding and keeping my mouth shut when my brother (pro pilot, plenty of money, not a clue) tells me what a genius Cramer is.

But great replies guys. I'm obviously not alone here. There's definitely a fine line between trying to educate and not offending or seemingly insulting someone's intelligence.

I think from now on, I'll just change the subject to football or golf.
 
riskarb,

sad yet funny and VERY TRUE!

Quote from riskarb:

They are sheep and they need to be led by the nose. They don't want to be bothered, they don't have the desire, and they want, above all else, to be coddled and mollified when the shit hits the fan.

$3,500 to buy into a dangerously-undiversified portfolio when for a $10 commish he could've bought SPY through IB.

No, leave him be... he may actually take offense to your suggestions. Ignorance is bliss.
More...
 
Quote from Apex Capital:

While Riskarb's comments once again hit the nail on the head, vehn really sums up the overall picture given that what we are really talking about here is a friendship.
More...


But what kind of friend are you, if you can't engage in frank discourse.....
 
I have take to saying that if you have a little bit of money that doesn't need to go into an RRSP or a program where the employer will match funds then let me know and I can set somethng up for you that a little better than a mutual fund. Although no one has taken me up on the offer I think it sounds good.
 
Funny. This happened to me last week. This so-called friend said "can you help me figure out how to use a _____trade account i just opened with $500. I want to buy SIRI, it is(was) at $6, i think it will go down to $5.5 and i will buy it there. Then i will start to learn how to invest in the market." Almost word for word, i swear.

Being that this person is:
1) extremely lazy and unmotivated
2) was just fired from a very lucrative retailing job that consisted of sitting on one's ass most of the day and figuring out which 3 fast food joints to get lunch from for the rest of the day
3) the last book this person read contained cartoon captions and send away prizes listed on the back cover

It dawned on me that there is nothing anyone can do to keep this person with their money(actaully the money is part of an inheritance). A seperation is imminent. I just made it clear that the market will be there to take the money even if he can't get out of bed until 2pm. We don't discriminate. :D
 
friends don't let friends drive drunk.

Quote from jnbadger:

I have a couple of friends who make great money as construction contractors, and who follow the market somewhat. One of them gets a couple of news letters every quarter and believes most of what he reads.

My problem is this. This good friend, who calls mortgage brokers WHORES because of the fees they charge, just gave the local Ed Jones rep 3500 bucks to manage his 100K account. He says the guy "guaranteed" him 9 - 12 % / year on his investment. I don't think the guy actually guaranteed that rate of return, but he probably implied it.

My friend says he does homework, but obviously not enough to find out he could just simply buy the Nas, the Dow, or the S&P (He has no idea what the q's diamonds or spyders are). Turns out this guy put him into five stocks. I don't remember which ones specifically, but they were all blue chips which were on the the Ed Jones "Focus List."

I guess the point is this. All I'm trying to tell this guy is that all he has to do is a little more homework and avoid the fees and commissions. Find some discount broker somewhere and buy an index. And he just doesn't get it. He trusts this guy. It's a small town and he goes with the trusted Ed Jones Guy. All I do is drive to the big city, an hour away, every day and trade for a living, so I don't know what the fukk I'm talking about.

It's all probably because his dad has gone to this guy for years and has basically bought every individual stock in the DOW, and paid commissions on each one. He's used to it and is passing it on.

I know some people think I'm over reacting, but I get tired of people getting raped without even knowing it.

So: do you just keep your mouth shut and enjoy your own cheep rates and returns, or do you try to educate thes friends. It seems that educating them just pisses them off.
More...
 
You must log in or register to reply here.
Back
Top