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Atrociously Dangerous Investment Advice

This title came out of a conversation when all the Financial Bloggers got together. Michael James discussed how an “Investment Advisor” from a well-known firm convinced a loved one 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 skullduggery”?

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. Still, it 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 underbelly” 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 convincing reasons), and sleep at night.

Is Dangerous Investment Advice Rampant?

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

Feel Free to Comment

  1. 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

  2. Dan @ Our Big Fat Wallet

    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.

  3. 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.

    1. 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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