TNSTAAFL

by Bill DeShurko

There’s NSuch Thing AA Free Lunch

The free lunch in the saying refers to the 19th-century practice in American bars of offering a “free lunch” to entice drinking customers. Obviously, bars weren’t in the business of giving away their goods. It simply occurred to them that giving away overly salted food was good for their drink business!

Today’s free lunch, or dinner offers have moved from bars to restaurants with financial advisors offering “Retirement Seminars” with pitches for high commissioned investment products or “Estate Planning/Medicaid Planning” with their canned documents that create illiquidity with irrevocable trusts and annuities. I guess if you can resist the pitch there can be a free lunch or dinner. But some poor attendee must be paying as my inbox is filling up with emails from companies that offer canned seminar services “guaranteed to fill a room”!

But I digress. While most people recognize the concept of TNSTAAFL when it comes to free offers, there seems no hesitancy to jump on board the free investment advice bandwagon. With interest rates falling to zero, market volatility on the upswing, and doom and gloom media still preaching recession. How long have they been saying that? I guess sooner or later, (my guess later they will be right, more on that next post). This is fertile ground for just bad investment advice as well as for outright scams.

So let me offer a couple of thoughts for self defense.

  1. TNSTAAFL
  2. Interest rates are fairly orderly. High interest rates accompany higher risk investments. Period. TNSTAAFL.
  3. Remember can’t miss investments like 3D Printing? Did you get caught on the band wagon for this one? In January 2017 The Motley Fool was hyping 3D Systems (DDD) and Stratasys, LTD (SSYS). DDD opened 2017 at $13.63 a share, went as high as (using weekly data) $23.70 in May and is now down to $8.99. Not exactly a wealth builder. TNSTAAFL.
  4. And how many of you, feeling the 401k might be a little shy of where it needs to be to fund that ideal retirement thought you’d get in at the bottom for “weed” stocks? Can’t even begin to name all the sources that were touting Cannabis as THE next big thing. Maybe you even decided to be prudent and go with the biggest provider from Canada, where there are no legality issues. Canopy Growth (CGC) opened on the NYSE on May of 2018 $25.78. Today (10/31/2019) it is trading at $20.06. Instead of money flowing to the legal producers, most pot sales are still of the illegal type as legal regulated pot can’t match the free market prices of the black market. TNSTAAFL.

In summary:

A corollary to TNSTAAFL is IISTGTBTIPI or If it seems to good to be true it probably is.

For you to receive an interest rate return on your investment, someone has to be paying that interest rate, plus a spread to pay the middleman. No One pays a higher interest rate than they have to. High interest rate = high risk. Period

Free investment advice is worth less than you pay for it. As in if you lose money. By the time you hear about the next big thing, the smart money has been made. The big boys are now looking to unload their shares to the mass market to lock in their profits.

We never added weed stocks to our portfolios. We turned down client requests to even buy weed stocks. At 401 Advisor, LLC we have a pretty simple philosophy; there are plenty of companies that are making a profit, have been profitable and we expect to remain profitable. Their stocks do well. Why buy anything else?

If your interested in an investment portfolio based on sound principles give Jim or myself a call.

Bill DeShurko

Bill@401Advisor.com

Jim Kilgore

Jim@401Advisor.com

Office: 937.434.1790

Mr. DeShurko is the Managing Member of 401 Advisor, LLC an independent registered investment advisor. Jim Kilgore is an Investment Advisor Representative of 401 Advisor, LLC. They are also  registered representatives of Ceros Financial Services, Inc. (Member FINRA/SIPC).  Ceros is not affiliated with 401 Advisor.  The views expressed are those of Mr. DeShurko and do not necessarily reflect those of Ceros Financial Services, Inc., its employees or affiliates.

Past performance does not guarantee future results.  There is no guarantee that any investment or strategy will generate a profit or prevent a loss. 


bill@401advisor.com • 937.434.1790

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Charles H. Dow Award Winner 2008. The papers honored with this award have represented the richness and depth of technical analysis.

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