Many thanks to the fine folks at TheStreet.com for running an excerpt from Financially Stupid People Are Everywhere: Don’t Be One of Them as a summer reading recommendation this weekend. They even linked to the feature from their top page, one of the investing world’s most trafficked properties. See the excerpt at their site here.
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I read Financially Stupid People and I found it very entertaining and accurate how you lay the blame ultimately at the feet of consumer who puts themselves in a life of servitude by working like a slave to service all the monthly debt they accumulate just to keep up with the Jones’ who are just as broke as they are!
It would have been a great benefit to those readers with very little investment acumen to have pointed them in the right direction with the money they do save for investing. This is where the book falls short in my humble opinion. The author should have advised readers to invest their hard earned money in low cost index funds and like everything else he preaches to them throughout his book, to keep these costs low!
When it comes to investing this is the one area where you DO NOT get what you pay for! Invest in a well diversified array of low cost index funds and leave it alone. Readers need to be made aware that Wall Street’s objective is not to make them money but to take it from them.
Just like you pontificate in your book about how corporations and the government have an interest in seeing us in debt so they can profit, Wall Street is no different. They do not provide a valuable service, they try to place us in loaded, high cost mutual funds, annuities and so forth that significantly diminishes our nest egg and purchasing power in retirement.
Index Investing should have been addressed in your book. Those that do take your advice and save 20% of their income may turn to a financial advisor or place their money in a loaded mutual fund and become shark bait! An additional “C” should have been added to your other three “C”s and that’s for Costly Investment’s To Avoid.
Thanks for the thoughts, Gene. I deliberately left investing advice out of FSP because it’s a different audience. I’ve written entire books devoted to the subject of different aspects of investing, and wanted FSP to focus like a laser on the people who are so far from being ready for investing that they have their hands full focusing just on eliminating debt and bad habits that keep them forever behind the eight ball.
I pointed this out in “Investing Can Wait” on page 160, from which this excerpt: “Do you know what it means to do well in the stock market? Earning an average of 10 percent per year. Do you know what keeping your credit card balance at zero pays? A guaranteed 11 to 18 percent per year, or more. Where do you suppose you should focus first?”
Once somebody has put the basic ducks of financial intelligence in a row, then they’re ready to move on to investing. At that time, I support your idea that index funds are the way for most people to go. Increasingly, however, I think people should allocate more of their investment capital to non-stock-market projects, where they retain more control. Let’s face it, the stock market ain’t what it used to be. When fundamentals stop mattering, people need to look elsewhere for financial planning.
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