Atrociously Dangerous Investment Advice

in Investments

This title came out of a conversation when all of the Financial Bloggers got together. Michael James discussed how an “Investment Advisor” from a well known firm, convinced a loved one who was over the age of 70 to take out a loan to purchase investment vehicles. This kind of dangerous investment advice worries me a great deal.

There was much discussion about how slimy that was, and Rob Carrick (I believe) then turned the phrase,

"... that was Atrociously Dangerous Investment Advice for any senior..."

How many folks have loved ones (or worse themselves) that have fallen victim to this kind of “investment skull duggery”?

Dangerous Investment Advice
A True Stock Ticker By H. Zimmer – Own work, CC BY 3.0,

Before I get my standard tsunami of “Margin Investing is a Perfectly Valid Investment Strategy”, it might be for you, but it really is not for someone on a fixed income that is over the age of 60 (possibly 50, but let’s not rehash that for now).

Where does this atrocious investment advice come from? Everywhere, from what I can tell (including the Internet, or maybe especially the Internet). There is a “seedy under belly” of investment advice that is out there solely to trick investors into making their “Investment Helpers” (for lack of a better legal term (that I won’t get sued for using)) more money.

I cannot comprehend how anyone could give this advice (I am willing to listen to arguments where it might be plausible to have a 70+ year old take out a loan to buy Mutual Funds, but I don’t think there are any cogent reasons), and sleep at night.

Is Dangerous Investment Advice Rampant ?

I guess the question I have for you, good reader, is whether this is common place? Have you heard of this, or is this an isolated incident?


  • Robert Champion July 8, 2014, 11:53 AM

    The pitch goes something like this: if you can borrow for 3% and stocks return 6-7% why not use leverage? Unfortunately, this exposes investors to a term miss-match: stocks historically return 6-7% over the long-term, say 10 years. In the short-term returns can be negative: the TSX declined over 30% in 2008. Investors typically borrow using a floating rate line of credit. If short-term rates rise, their cost of borrowing can soar. When interest rates climb, equity markets often decline. In our experience very, very few investors, regardless of age have the intestinal fortitude to handle this.

    We have written a number of post about why both investors and their advisors fail to understand risk. See http://www.sprunginvestment.com/tag/risk-vs-return/

  • hgstern June 25, 2014, 10:26 AM

    The Cavalcade of Risk is up, and your post is in it:


    Please let your readers know.

  • Dan @ Our Big Fat Wallet June 12, 2014, 7:42 PM

    I haven’t heard of this type of advice and it does sound scary. As you mentioned a younger person would have more time to recover from a (potential) mistake like this but an older person should (in my opinion) opt for more safety & security.

    • bigcajunman June 12, 2014, 7:47 PM

      Risk is a younger man’s game (in my opinion) (or woman’s game).

  • LifeInsuranceCanada.com June 11, 2014, 7:19 PM

    If the tactic is good for a 30 year old, i.e. it produces a higher return, then why wouldn’t a 70 year old do it?

    Aaaah, because you’re assuming that a 70 year old must have a specific risk tolerance profile. It’s possible that the advisor and the senior don’t agree with your view of their risk profile. At 70 years old, they’re able to make their own assumptions, despite what the grandkids think.

    I’m not disagreeing with what you’re suggesting in general, only that it’s not necessarily true in the specific. And I will suggest that there’s a larger possiblity that the advisor tends this way as well, rather than assuming they have the client’s worst interests at heart.

    • bigcajunman June 11, 2014, 7:21 PM

      Well in this instance it was an atrocious piece of advice, I’ll leave the grandchild to comment if he wishes. As for the difference between a 30 year old and a 70 year old ? 40 years to recover from a bad decision (or maybe just bad luck), I suppose.


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