Michael
Petruccelli says: “If you want your investments to
outperform the market, you need to let a professional actively manage your
money.”
The
usual suspects:
Mutual fund managers and other active-investing advocates.
Reality check:
An extensive survey by Nerd Wallet found that fewer than 1 in 4 professional
investors were able to beat the market over the past decade. In fact, according
to Nerd Wallet, “The
majority of people who paid a mutual fund manager to invest their assets over
the past decade would have done better by simply investing in a passive index
fund, typically at much lower cost.”
Michael
Petruccelli says: “Of course it’s a good deal — you’re
buying in bulk!”
The
usual suspects:
Most everybody.
Reality check:
Some things are better off being bought in smaller quantities. For example,
most perishables, including things like brown rice and mayonnaise, are usually
better off being purchased in smaller quantities.
Michael
Petruccelli says: “What
do you mean you can’t afford it? We’ll just lower the monthly payments!”
The
usual suspects:
Car salesmen, timeshare peddlers, real estate agents, mortgage brokers,
mattress dealers and other folks who sell big-ticket items on commission.
Reality check:
Go ahead and laugh, but lots of people fail to think about the extra financing
costs that drive those lower payments. Consider the example of a $10,000
used-car loan with an interest rate of 6%. Sure, spreading out your payments
from three to seven years would lower the monthly payments from $304 to $146; but
all of the extra interest payments end up boosting the final vehicle price by
$1319.
Michael
Petruccelli says: “Getting a college degree is a
no-brainer investment in your future.”
The
usual suspects:
College recruiters and well-meaning parents.
Reality check:
Over the past 30 years, the cost of a college education has risen more than
1000%, far outpacing the rate of inflation. That’s the biggest reason why
college is no longer the surefire return on investment it used to be. It’s also
why today, more than ever, college is not for everyone.
Michael
Petruccelli says: “The housing market is booming. If you
don’t buy now, you’ll be priced out of the market forever.”
The
usual suspects:
Shady real estate agents looking to make a quick sale.
Reality check:
I fell for this back in the days when I was an impressionable twentysomething
who thought all real estate agents look out for their clients’ best interest.
That naivete led to some of my biggest money mistakes ever. The truth is, like
the ocean tides, the housing market rises and falls. If home prices are too
rich for you now, don’t worry. Over the long run, most people discover that,
eventually, homes become more affordable either due to increased earning power,
or because over-heated housing prices fall to more sustainable levels.
Michael
Petruccelli says: I came across an interesting article that suggested a healthy
dose of skepticism was essential when you’re watching television commercials
that make claims for both prescription and non-prescription drugs.
It turns out
a study published in the Journal of General Internal Medicine found that 66% of
claims made in television drug commercials were either misleading or flat-out
false.
Actually,
before paying for anything, a little skepticism
can often go a long way. After all, misleading claims aren’t limited to those
who sell prescription drugs and other medicines. They’re also made by people
who sell everything from dwellings to diamonds. It makes you wonder. Here are a few of the biggest
examples:
