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Entertainers Disguised As Financial Experts Are Dangerous

Educators should be entertaining, but entertainers shouldn't be educators! This is especially true in the world of personal finance where more people are commonly turning to entertainers or influencers for financial guidance. These individuals provide tons of questionable financial advice which is often labeled as "not advice" due to regulatory requirements. Let's look at just a few examples:

Dave Ramsey: Dave Ramsey recently proclaimed that an 8% withdrawal rate was perfectly safe in retirement because the stock market returns approximately ~12%. This isn't just bad "not advice," it's also dangerous for several reasons, including:

  • The stock market doesn't historically return 12%, but rather ~10%.

  • In retirement, most people shouldn't have their entire portfolio invested in the stock market.

  • A statistically proven safe withdrawal rate is approximately 4%, known as the Trinity Rule, which means that Dave Ramsey is telling people to withdraw twice as much than what's typically recommended by actual data. The reason it's dangerous is pictured below:

A man who is homeless because he used Dave Ramsey's 8% withdrawal strategy

Grant Cardone: Grant Cardone is a real estate mogul who advocates a 40/40/20 rule. This rule allocates your gross income as follows:

  • 40% should be set aside for taxes;

  • 40% should be invested; and

  • 20% for living expenses

If you can invest 40% of your gross income then that's terrific; however, this "not advice" will be nearly impossible for the average American to implement. For example, the median household income in the United States is ~$75,000 which would require you to live off $15,000/year, which is significantly below the poverty line. Additionally, the average income tax rate in the United States is ~14%, not 40%!

Jim Cramer: Jim Cramer makes so many questionable stock picks that there is literally an Exchange Traded Fund (ETF) which invests based on the opposite of what he recommends. Aside from the terrible individual stock recommendations, my primary concern with Jim's "not advice," is that he continues to advocate for retail investors to buy individual stocks, despite data that concludes this is a losing proposition. Investing in individual stocks is a game of luck, but people still seek out Jim Cramer and pay $399/year to be part of this investing club. The idea that he can recommend individual stocks to people based on a 15-second phone call is pure entertainment. The only people who are more successful at picking individual stocks are the anon accounts on social media.

Batman slapping Robin because he said that picking individual stocks is easy

If you want to work with a financial planner who focuses on education with a side of entertainment, then please schedule a free introductory meeting below. For less than $5/day, Walk You To Wealth is the most affordable way to access professional help.

Disclaimer: The information in this post is provided for your convenience only and is not intended to be treated as financial, investment, tax, or other advice. The information is intended to be educational and is not tailored to the investment needs of any specific individual.  It is also not intended to be relied upon as a forecast and is not an offer or solicitation to buy or sell any securities or to adopt any investment strategy.  The opinions expressed are those of the author.  Reliance upon the guidance and information in this presentation is at the sole discretion of the individual.



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