There certainly are no shortages of financial blogs going around these days, including ours. The fact is that financial advice is easy to find on the Internet but the question is, is that advice pertinent, valuable and helpful? It’s a good question, isn’t it? With so many blogs and “professionals”purporting to have “excellent advice” it’s hard to sometimes determine if that advice is actually good or if it’s more self-serving ( or just plain wrong) than helpful.
To put aside any thoughts that the occasional reader might have that we don’t take care of our readers, we’ve put together a blog today with some financial advice that you actually should not follow based on the words and opinions of one of the most respected financial advisors today, Suze Orman.
A two-time Emmy award winning host, Suze Orman has been hosting her show, the aptly named The Suze Orman Show, on CNBC for quite some time. Her 9 (yes, 9!) back-to-back bestsellers on the New York Times Bestseller list are a testament to the fact that she actually knows what she’s talking about. For us, when Suze Orman gives advice about how to take care of our finances we certainly listen and, for that matter, when he warns us about what not to do we listen even more closely.
Ms. Orman was recently interviewed on Talking Numbers and gave her opinions on 3 of what she calls the “worst pieces of advice” other personal finance “experts” routinely gave to their readers and listeners. In our opinion the warning is worth remembering closely as, from what she advises, all 3 of them could be highly detrimental to the health of your portfolio.
Suze Orman’s Worst Piece of Advice #1. Investing in Whole Life insurance.
Ms. Orman: “What’s sad is that [people] see a financial advisor or an insurance agent [who says], ‘I know, you do two things: you can protect your family by buying whole life, universal [life], or variable life insurance and, at the same time, you can invest. So you can have your cake and eat it, too.’”
“Are you kidding me, people? That is one of the worst investments you will ever make in your life!
“Insurance should be insurance and investments should be investments. If you need insurance, the only type of insurance you should buy is term insurance, in most cases. And if you want to invest, stay away from insurance. Do stocks, mutual funds, ETFs (exchange-traded funds)… whatever’s out there but don’t use an insurance policy as an investment.”
Suze Orman’s Worst Piece of Advice #2. Putting your money in Immediate annuities.
Ms. Orman: “Right now, interests are still relatively low even though they’re headed up probably. We still have one of the lowest interest rate environments ever.
So now what’s happening is you have all of these financial advisors preying on the fear – especially of the retired – of low interest rates and saying, ‘If you just invest your money in an immediate annuity or a life income stream annuity which will pay you a monthly income for the rest of your life…’ – and they give you this big figure it will pay you – ‘that is how you should take care of your retirement.’
“Again: The worst investment you will ever make. You are locking in the lowest interest rates that we’ve had in a really long time. You don’t want to do that.
“They reason that they’re able to give you more than you can get somewhere else is they are giving back your principal to you. You want to make it so you invest your money to take advantage of higher interest rates in the future and doing an immediate annuity is not the way to go.”
Suze Orman’s Worst Piece of Advice #3. Putting your money in Bond Mutual Funds.
Ms. Orman: “Again, staying with the same theme of interest rates increasing: Everybody knows that when interest rates go up, the value of bonds go down.
“If you are going to buy a bond mutual fund, you have to be very careful because if interest rates go up, the value of that bond mutual fund will go down. And, in a mutual fund, there is absolutely not maturity date.
“So, what are you thinking? The worst thing you could do with your money right now is put it into a bond mutual fund. If you need income and you want to invest in municipal bonds, for instance, buy individual bonds. But, stay away from bond mutual funds.”
There you have it, advice from one of the foremost financial professionals in the business today. We give advice here as well and, if there’s something that’s not covered in our blog today that you’d like to ask questions about or need advice about, please let us know and we’ll get back to you as soon as possible.