You're lucky it's just your friends. Things really get sticky when it's your family or in laws. Basically, there are a lot of people with more money than time or inclination to do the research and due diligence necessary to run their own money. They lack the sophistication to use a registered investment advisor, so end up with "financial advisors", aka retail brokers. The problem is that you really can't help them, not unless you are willing to put your friendship on the line to save them some dough. If you recommend an advisor, heaven help you if he ever has a losing trade because that is all they will remember. They will also assume you got a referral fee and are basically complicit in "robbing" them. About the most you can do is look over their portfolio to make sure it's not dangerously concnetrated and ask them what they will do if the market declines by 10%. You might also point out that their broker gets extra commish for sticking them in those closed end IPO's that go to immediate discount.
If you tell him to buy SPYs and the market tanks you will probably get the blame for losing him money. Unless you are prepared to manage money on his behalf and can garantee his downside then you are only opening yourself up for being blamed.
I have run across this sort of thing too. I just keep my mouth shut. I find that decisions about money are emotional, not rational for most people. It is impossible to use logic to persuade when emotion is in charge.
I agree. CNBC sucks. The only value I seem to get out of it anymore is listening to Squawk Box on XM on the way to work in the morning. Seldom valuable, but if something serious is going on, you're primed for it. And speaking of CNBC, and in relation to this thread, I've resorted to just nodding and keeping my mouth shut when my brother (pro pilot, plenty of money, not a clue) tells me what a genius Cramer is. But great replies guys. I'm obviously not alone here. There's definitely a fine line between trying to educate and not offending or seemingly insulting someone's intelligence. I think from now on, I'll just change the subject to football or golf.
His dad probably got pretty rich buying all the Dow stocks over time even at full commission. That's the big picture.
I have take to saying that if you have a little bit of money that doesn't need to go into an RRSP or a program where the employer will match funds then let me know and I can set somethng up for you that a little better than a mutual fund. Although no one has taken me up on the offer I think it sounds good.
Funny. This happened to me last week. This so-called friend said "can you help me figure out how to use a _____trade account i just opened with $500. I want to buy SIRI, it is(was) at $6, i think it will go down to $5.5 and i will buy it there. Then i will start to learn how to invest in the market." Almost word for word, i swear. Being that this person is: 1) extremely lazy and unmotivated 2) was just fired from a very lucrative retailing job that consisted of sitting on one's ass most of the day and figuring out which 3 fast food joints to get lunch from for the rest of the day 3) the last book this person read contained cartoon captions and send away prizes listed on the back cover It dawned on me that there is nothing anyone can do to keep this person with their money(actaully the money is part of an inheritance). A seperation is imminent. I just made it clear that the market will be there to take the money even if he can't get out of bed until 2pm. We don't discriminate.