Here’s the clip of the To The Point radio program I was on yesterday. There was a bunch of people on, you can hear me at 23:30 talking about the Grocery Shrink Ray and 37:30 talking about the customer service hotline Sprint set up for Consumerist readers. It’s a great show and I love Warren Onley’s voice, but I have some issues with the advice some of the other guests gave on the show that I need to address. Here’s what I would have said had I been asked some of their questions…
How should people invest?
One guest said that you should diversify your portfolio and invest globally. While this is true, here’s something that will actually help you: Get into index funds – Vanguard is a good to get them from – because you will get to keep more money over time instead of losing it to fees. Here’s how most stock pickers and fund managers are ripping you off.
Also, with the global economy being so intertwined, investing globally doesn’t reduce your risk as much as it might have in the past.
One guest recommended putting the same amount of money in the stock market because it is a “tried and tested” method of investing. What he’s talking about is “dollar cost averaging.” The idea is supposed to be that some months the stock is up, and some it’s down, but if you invest the same every month, over time the difference averages out. While investing regularly is great and definitely better than not investing, and trying to time the market can be disastrous, you actually make more money if you buy your stock in one lump sum. Here’s the study.
Are credit card companies going to keep on lending briskly?
Warren asked a guest if credit card companies are going to keep lending money at the same ferocious rate they have been. The guest said yes, because their mailbox was still full of credit card offers. This is flat out wrong. Credit card companies are tightening standards and reducing their exposure. They’re raising interest rates, canceling and freezing people’s home equity lines of credit, and canceling credit cards for long-standing perfect customers.
Secondly, if your mailbox is full of credit card offers, you need to go to optoutprescreen.com and with a few keystrokes you can be unsubscribed from probably about 98% of the lists of companies sending you offers.
Who is to blame for the mortgage meltdown?
“There’s enough blame to go around for everyone,” responded one guest. While this might have made sense, say, back in December, by now it’s pretty apparent that there was much more fraud and deception going on with the mortgage brokers and resellers than from the consumer side. Don’t believe me? Listen to this episode of This American Life while watching this slideshow. If you’re in a rush, just read this insider document of a Chase employee telling other employees how to game the computer system to get loans approved that shouldn’t have been approved.