Tuesday, August 6, 2013
"Assault on Wall Street" From an Investor's Point of View
Recently I had the opportunity to watch "Assault on Wall Street" for its great action. This was a great film for entertainment, but in reality, an even greater film from an Investing perspective. Without giving away any of the plot, I wanted to highlight some mistakes the main character made that reinforced what I have recently learn through investing.
Lack of Diversification:
The main character had his entire 401k in a single fund. This fund tanked and he suffered big time, because he had no diversification. If he had his money spread out amongst other things the effects really wouldn't have been as devastating, even in the peak of 2008. Why was he invested like this? Because he let his Broker handle his funds for him. Which leads me to point number 2.
Use of a Broker:
The main character used a broker, and a bad broker to make things worse. I once heard Dave Ramsey say that 'Brokers are no good because they are "broker" than you are,' or something to that effect. I find truth here. If they were so good at managing money, they would have all of their money invested in the best ways possible and wouldn't care for silly commissions and bonuses etc.
Importance of good Health insurance:
This guy's insurance was terrible and had a spending cap. Long story short~ his family finances were wrecked because of this. Yes maybe you can have a lower premium and have a higher deductible, which is fine. But be sure to read the 'fine print' and know what you are paying for.
ARM's are bad.
What will the interest rate be in the future? Only a few people truly know- which makes this a losing game. If you must have a mortgage on the house be sure its a fixed rate (with no penalty for pre-payment). This way there will be no surprises with your monthly payments and you know exactly what is going on with the details of the loan.
Got nothing? Smokers will still smoke.
I know this is just a movie. But when I see the main character smoking cigarettes after completely losing everything and having no money, I believe any smoker would still find a way to do the same. This would be a plus for MO, PM or LO etc.
Chaos everywhere? Guns may be the only valuable thing.
In the film the main character is forced out of his house and the only thing he grabs are his guns. I see truth here too. If your world 'goes off a cliff' and everyone is in a panic, I can't see precious metals having any value. Items that satisfy a personal need would have value during desperate times (tradeskills would be important too). People would barter and get things they need.
If you haven't watched "Assault on Wall Street" I would recommend it. Aside from all the action, you may pick up on the same ideas that I had, and the investor inside of you, could find even more. Have you seen it? What do you think?
Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.