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A Great Example of Idiotic Logic that Many Buy Into. Hope You're not One of Them!

By
Real Estate Agent with Bill Cherry, Realtor 0124242

I’d like to discuss with you today some idiotic logic.

One of the major reasons many “Certified Financial Planners” give for avoiding the stock market is what they claim to be the market's miserable track record.

All the while, stock brokers counter-propose that it’s the perfect place to grow money, and they give their examples.

Who's right, you ask?  Neither!

Here are the problems with the logic that gets them to their conclusions.

To begin with, both use the Dow Jones Averages at two points in time to justify their conclusion.  That totally mitigates investments in specific stocks and allowing those investments to remain fluid throughout the time periods.

And secondly, obviously many investors make a great deal of money during terrible Dow Jones markets.  And conversely, many others lose a great deal of money during powerful Dow Jones markets.

Soooo…

If I want to prove the market is a bad place to invest, I show it historically by picking a date when the Dow Jones was at a high, and I contrast it to a future date when the Dow Jones was at a low.

If I want to prove the market is a good place to invest, I show it historically by picking a date when the Dow Jones was at a low and contrast it to a future date when it was at high.

CONCLUSION:  If you followed the advice of anyone who advised you to invest in specific stocks, and you lost money, the advisor’s advice was faulted. 

Bill's Wealth Coach for Realtors Web Site


William S. Cherry
Real Estate Broker and Wealth Coach

Since 1964

972 677-7028

Comments(4)

Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Bill -- there does seem to be a tendency to "cherry pick" the time frame of the references to meet the needs of the sales force.   Much better if they give reports, like most mutual funds, showing YTD, 1,3,5,10 year and since inception.  If all stocks were sold with the same disclosure, there would probably be a few less problems with people not liking the investment they are in. (Of course, that means they would have to read the prospectus and compare various reports).

Feb 06, 2013 05:18 AM
BILL CHERRY
Bill Cherry, Realtor - Dallas, TX
Broker & Wealth Coach

You're so right, Steve!  Thanks for that great addition to the post.

Hope all is well in Tacoma!

Bill

Feb 07, 2013 12:36 PM
BILL CHERRY
Bill Cherry, Realtor - Dallas, TX
Broker & Wealth Coach

You're so right, Steve!  Thanks for that great addition to the post.

Hope all is well in Tacoma!

Bill

Feb 07, 2013 12:37 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

I suspect the vast majority of folks shuffling around the country are outsiders to what is really going on with Wall Street.  Your blog provides some valuable insight into it.   

Feb 08, 2013 06:24 AM