So very often the mantra of personal finance is simple: Make small changes now, and decades from now you'll make some huge gains.
It might not be as thrilling as riding the Coney Island Cyclone, but it seems to work. Slow and steady wins the day, at least financially.
But what about when all that prudent advice goes out the window? What happens when the counsel of trained financial whiz-kids and seasoned sages is ignored? The following real-world examples from financial advisers across the U.S. should give you an idea. And here's a hint -- it's not pretty.
The stoner and his father: $200,000 up in blue smoke. At the turn of the decade, the legitimate medical marijuana industry was nascent but potential profits looked huge. It was then that one of Rebecca Kennedy's clients at her fee-only financial advice company in Denver decided to invest in his son's pot-growing startup.
"The son was in his early 20s and was a college dropout," says Kennedy, who runs Kennedy Financial Planning. Still, that didn't stop the father, who had zero business experience, from jumping in.
"The father said, 'Great idea, let's do it,'" Kennedy says. And he decided that the new company needed only the best, state-of-the-art equipment. The investment was approximately $200,000.
Despite the great potential, all the money was lost as "the son turned out to be a pothead," she says. Looking back, she would have liked to see a different result, but unfortunately her client's ears were closed.
"The father was so arrogant that there was no telling him what to do with his money," Kennedy says.
Or put another way, the father's arrogance turned $200,000 into blue smoke.
A shoe box full of penny stocks. In the early 2000s, financial planner James Parks was introduced to a recently widowed woman. Her husband had told her: "When I die, you will be taken care of. Inside of this shoe box are stock certificates of all our investments."
Parks, who now works at Parks Wealth Wealth Management in Ridgewood, New Jersey, says he didn't recognize most of the company names on the stock certificates.
Worse than that, 19 of the 20 stock holdings were each worth between $1 and $2. That's not per share, but total value of the holdings in each company!
They were penny stocks, or the sort of shares you can find on the so-called pink sheets. They tend to be very risky. "Thankfully, there was one utility that did well," Parks says. "She managed to make that into something worthwhile."
The financial problems this couple had were twofold. The husband and wife weren't communicating about their money -- she didn't know what was owned or why it was owned. "What they needed was professional advice rather than a mysterious box," Parks says.
On top of that, they were investing in very risky securities. Parks says people who aren't wealthy are often attracted to penny stocks because of the low price and the potential for huge payouts. "Such investments rarely work out well," he says.
Another penny stock debacle was presented to James Bryan, principal at Cahill Financial Advisors in Edina, Minnesota. In 2003 he had a client in his 30s who owned some penny stocks that were worth approximately $5,000. But during the period that Bryan spent developing a financial plan, their value shot up to nearly $60,000.
"I advised him to sell off most of the holdings to pay off his mortgage," Bryan says. "'You'll be the youngest person I know to pay off their mortgage,' I told him."
But the advice was rejected and almost instantly the value of the shares sank to less than $10,000. The client is probably still kicking himself now, more than a decade later.
Exotic birds: the wrong sort of killing. David Demming, managing partner at fee-based advisory Demming Financial in Aurora, Ohio, says his company worked with a young beneficiary in the early 1980s who inherited $100,000.
"He turned 21, took the money and bought exotic birds," he says. The idea was to breed them, and have a store selling these animals.
Unfortunately, the birds all died within a couple of months. "Basically, he spent it all in 90 days," Demming says.
The advisor isn't a big fan of trusts because of their administrative costs -- but he says they are useful when a beneficiary has special needs or is a spendthrift.
Money placed in trust for that spendthrift beneficiary, and invested in a balanced portfolio of stocks and bonds, could have grown into a nice nest egg in the 34 years since then. If the initial $100,000 had grown at an average of 8 percent a year, it would now be worth approximately $1.4 million.
Instead, it disappeared like a feather blown away in the wind.
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