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The stereotype is that many of these athletes go broke because they are foolhardy with money. I appreciate that this article highlighted that a lot of these guy

The stereotype is that many of these athletes go broke because they are foolhardy with money. I appreciate that this article highlighted that a lot of these guys go broke because of scamming financial advisors. The athlete attempts to do the responsible thing and hires someone they are led to trust with managing their assets only to be ripped off. I'm not sure how financial literacy prevents this from happening when you literally may be lied to about where your money is.

ChuckMcM 9y ago
Agreed, look at it from their perspective. They haven't been around a lot of money before, they don't have a lot of friends who have been around a lot of money either, so they don't really know even what questions to ask to understand the people who are arguing to be their financial advisors. Perhaps major league sports would do well to help train their athletes in the basics of financial management in order to help avoid this situation.
- test6554 9y ago
  It's not their responsibility though. The player could take a course on their own initiative.
  - specialist 9y ago
    Which courses do you recommend?
    - WalterBright 9y ago
      I'd start with a course on basic accounting, which you can get at your local community college. It's critical to be able to read and understand a financial statement, and it's not that hard, either.
  - Jtsummers 9y ago
    It doesn't need to be their responsibility, it is something they could do and wouldn't cost them much. If anything it could help with their recruiting efforts: Show a list of athletes that got screwed by shady advisors; show how they'll connect you with real advisors (at established and more trusted institutions) and education to discern what options are good and what aren't. Won't make a difference when tyring to get that top QB, but it may for all those guys who're only making $150k-300k.
  - ChuckMcM 9y ago
    Its true they could. I think of it like auto repair shops. Here is something really valuable to your daily life, and you want it taken care of properly, but how do you verify that the person you are talking to is honest and trustworthy? You could buy the factory service manual for your car and read it cover to cover, with digressions into the parts which are assumed to be known by anyone servicing a vehicle, and then you could evaluate an auto mechanic's answers based on a ground truth of the service manual, but how many people actually do that? 1% ? 10% ? In my experience in the Bay area with people who suddenly have more wealth than their friends and family ever did, there are two ways that people seem to split. Either they start splendiforus spending because they are "rich" or the start calculating what sort of 'burn rate' they can support drawing down at a rate of anywhere between 2% and 10% of their net worth. Using the 4% number (which used to be the standard before the great recession knocked it back to 2% for more conservative savers). One of the things that people usually don't think about deeply is that money in the bank pays you, things that you own cost you. A car needs gas, a jet needs maintenance, a home needs gardening. And when you scale up the 'thing' you scale up the cost. As a result if you live what you perceive to be a 'rich' life you may find its sucking your wealth away. There are lots of studies on lottery winners which show this effect.
    - wutbrodo 9y ago
      > In my experience in the Bay area with people who suddenly have more wealth than their friends and family ever did, there are two ways that people seem to split. Either they start splendiforus spending because they are "rich" or the start calculating what sort of 'burn rate' they can support drawing down at a rate of anywhere between 2% and 10% of their net worth. Wow that's depressing as hell. I've seen the spending side of things, but for a long time out of college I was making more money than anyone I knew and also spending towards the bottom of the distribution. I think I was 25 when my average return started covering my cost of living. My family didn't have much money growing up (due to medical reasons) and my parents don't really know much about managing money, probably because they both come from upper-class backgrounds where family money just seemed "taken care of". So I have to confess I'm not really sure where the financial irresponsibility of the sorts discussed in this post comes from. I'm tempted to say that it's a simply matter of high time preference, but that's a really self-serving explanation, so I'm not quite satisfied.
  - gech 9y ago
    Everyone but myself be damned.
- 48snickers 9y ago
  The NFL already does: https://www.marketwatch.com/story/this-nfl-training-camp-turns-football-players-into-financial-stars-2016-04-06 https://www.marketwatch.com/story/this-nfl-training-camp-tur...
- jessaustin 9y ago
  Like any employer, it isn't actually in leagues' interests for their employees to have financial acumen. Your boss loves to see your new $50k vehicle in the parking lot.
  - Jtsummers 9y ago
    You're right, them having debt like that means they're more likely to stick around (because they can't afford to quit). But it also means they could be more mercenary (seeking out the jobs that get them out of the debt, or let them keep spending themselves into debt). Debt also puts people into compromised positions. Having worked around defense stuffs, that's an exploitable position. And people will exploit it. It's not just for government secrets either. Working on a corporate X project to make the latest and greatest self driving car? Have 6- or 7-figure debt? Someone may slide up to you in a bar and buddy up, take advantage of the desperation and get you to compromise your employer's secrets. For athletes, this means getting asked to throw games and underperform.
    - jdavis703 9y ago
      For six figure debt? I was under the impression that six figure mortgages were pretty common...
      - emodendroket 9y ago
        The picture he has in mind here is probably more like six-figure credit card debt.
        Jtsummers 9y ago
        That’s what I had in mind. Or maybe being underwater on a mortgage or a second mortgage. But generally I meant high interest, high principle debt.
- WalterBright 9y ago
  The best thing a person can do in such a situation is to put the money in a savings account, and then set about learning what to do. Nobody is going to have their best interests at heart but themselves. If you want to have money, you have to learn to manage it yourself. There's not really a choice about it. Also, hire a properly licensed CPA. Make sure to listen to his advice on taxes. Don't give him a financial incentive to benefit if you follow his advice.
  - kpil 9y ago
    If you put that kind of money in a savings account, the bank will call you twice a day until they have made you move the money into something more profitable (for them.)
    - WalterBright 9y ago
      Your bank will stop calling you if you threaten to move your account.
      - WalterBright 9y ago
        BTW, any sane business would put their best salesmen on dealing with their wealthier clients, and those salesmen will know that haranguing customers on the phone is hardly the best way to sell them.
        uiri 9y ago
        Actually, you might be surprised at how often a soft no means yes, in business. Of course, in one's personal life, people try not to be rude, so a soft no is often really a hard no. An athlete or doctor or lawyer who is too busy to give the salesman the time of day might be really interested but simply too busy to make time for the call. A good salesman won't give up after the first soft no. It is often the case in these situations that persistence is polite.
        deleted 9y ago
- hinkley 9y ago
  It is sobering math to figure out that a million dollars is only about $25k a year for the rest of your life. A million bucks will make the rest of your life easier as long as you don't 1) spend it all and 2) don't make yourself unemployable (injury, bad PR, etc)
  - magnetic 9y ago
    How are you computing that? Perhaps you are forgetting that an investment still grows while you are withdrawing from it? Here is a calculator that helps you compute how much you can actually pull from it: https://www.money-zine.com/calculators/retirement-calculators/retirement-withdrawal-calculator/ https://www.money-zine.com/calculators/retirement-calculator... If you set the initial variables to: - Retirement age 40 - Life expectancy 83 - Annual Return 7% (typical of stocks) - zero out everything else (no pension, no social security) You get about ~$74K a year. Even if you started retiring at age 25, you'd still be pulling ~$71K a year.
    - freddie_mercury 9y ago
      This is not a good way to calculate it because it ignores volatility of the investment. There are decades of publications in the topic of sequence of returns and the impact on retirement. $25,000 is likely a little too low but $70,000 is way, way too high. Most people who've done research agree that something like $25,000 to $35,000 a year from $1,000,000 is reasonable for someone retiring extremely young.
      - ChuckMcM 9y ago
        Which corresponds to 2.5 - 3.5%. Back in the 90's when I was doing my research 4.2% was the "magic" number. Of course your life expectancy has to factor in to, so if you boost your withdrawal rate as you get older you can try to hit $0 right when you die. (like timing the market, not recommended) As people point out the thing to remember is that your costs change too, your health care costs go up but if your family moves out and you pay off your house your outlays go down. "Downsizing" or reducing the owning of expensive things (especially ones that require maintenance) can really help your burn rate.
- sanderjd 9y ago
  Yeah, that was my thought too - don't all these sports have players' associations / unions? What in the world are they doing, if not helping with this problem?
- ixacto 9y ago
  This is generalizing people of different backgrounds' knowledge of securities. There are plenty of middle/upper class people who buy into idiotic mutual funds with a 3% front load fee. Wtf? Heck, many employers still offer absolute garbage funds in their 401k. I wholeheartedly agree that major league sports should provide financial management skills, however the same should also be provided at large corporations.
  - bko 9y ago
    I think there is a difference between buying into a 3% front loaded mutual fund and investing in a restaurant in downtown Miami. The first is suboptimal and almost certainly won't beat the market, the other is likely to lose 100% of principal invested within a few years. I guess the equivalent for a non-wealthy person would be to invest all their money into lottery tickets.
    - ixacto 9y ago
      Suboptimal to say the least. https://investor.vanguard.com/mutual-funds/low-cost https://investor.vanguard.com/mutual-funds/low-cost With Vanguard/Fidelity/Schuab you can make only 45k/yr over your whole career, put the $5500 into an IRA in VFIAX/VOO starting at age 22, and have an retirement income of $58k/yr (not including social security) when you retire. This approximately 1.1-1.5 million in retirement is enough savings IMO, and allows you to pursue whatever career you want, e.g. nonprofit/teaching/part-time with much less anxiety than a traditional pension or more active investment like a restaurant. Maxing out an IRA is only a 12.2% pre-tax savings rate for someone with a $45k/yr income. This is not difficult at all, however it is important that it starts in the early 20s.
alvah 9y ago
I'm not convinced it's as black and white as that. Look at the example given (Rocket Ismail). Not to pick on an individual, but he doesn't seem to be taking responsibility for any of his losses, even with the supposed "hindsight" he now enjoys: -"One of his advisers pitched the idea as"fail-proof, with no downsides," Ismail recalls. He never recouped his money and has no idea what became of the restaurant." -(COZ Records) "The guy was a real good talker," says Rocket -(Cosmetics) "We were not prepared for the sharks in the beauty industry" -(Retail stores) "The main store opened up in New Orleans, but doggone Hurricane Katrina came two months later". The shops no longer exist. What strikes me about these examples is they're all supposedly somebody else's fault. To my mind, what isn't being taught (both to young athletes, and to the population in general) isn't so much personal finance, but personal responsibility.
- nkrisc 9y ago
  These examples mostly sound like they're about financial literacy, or at least the first thing you learn: if it sounds too good to be true, it probably is. Individually: Nothing is fail-proof. People will say anything to get your money. Business is cutthroat. And shit happens.
- rconti 9y ago
  I think the issue is, we're all thinking they're stupid for not realizing the risk of their investments, but maybe they do! Or maybe they recognize half or a quarter of the risk. But they don't understand the alternatives. Nobody is on the "other" side saying "invest in mutual funds!" They probably get "exciting business opportunities" and "help your friends and family" and "spend it all on hookers and blow!" and the "exciting business opportunity" might sound like the best way to keep their fortune going compared to the other options.
  - richardw 9y ago
    I suspect that you're right and possibly because of the following reason: they've had a lifetime of outsize results. They were always the fastest, strongest, got the girl. Now comes along either a normal ETF with average returns, or the promise of outsized ones sold as insider tips between experts. It'd be tempting and in-character to swing for the fences.
nikanj 9y ago
I wonder how much shady side-betting these financial advisors do. It's easy to make a few hundred thousand, if you get to decide where your client invests a few million. Reminds me of the good old Goldman Sachs, who made a killing betting _against_ their clients. https://www.theguardian.com/world/2010/apr/25/goldman-sachs-senator-carl-levin https://www.theguardian.com/world/2010/apr/25/goldman-sachs-...
- vostok 9y ago
  I've never understood this perspective. If I buy something from Goldman then they think the price is too high and I think the price is too low. If I sell something to Goldman then they think the price is too low and I think it's too high. If they're not willing to bet against me then they'll say something like "sorry trader was off the desk". Or if they're just less willing to bet against me then they'll say "sorry mate wide atm due to volatility".
  - baddox 9y ago
    I don’t think your perspective is very useful, because you seem to be assuming that all commercial transactions are zero-sum, since you describe both parties believing they are the only ones benefitting from the transaction. If I buy a $5 sandwich at a deli, it’s not the case that I think they’re suckers for valuing $5 more than the sandwich, and I doubt they think I’m a sucker for the inverse. Clearly, what’s really going on is that I am hungry and cannot eat a five dollar bill, whereas the deli has way more sandwich ingredients than they need to eat themselves, and they need money for other expenses. We both benefit.
    - vostok 9y ago
      I'm more relying on my experience in trading with Goldman and other banks than I am assuming anything. I also don't see where I said anything about zero sum games.
      - sowbug 9y ago
        FWIW, I read your comment the same zero-sum way. Perhaps it was because you used the term "the price" as if there's one price and any deviation from that value represents error. If I have three shoes, I might correctly place little value on the extra, while a person with only one shoe might correctly place a lot of value on it. My selling the shoe for anything more than $0 is rational, and the other person's buying the shoe for anything less than the price of a full pair of shoes is also rational.
WalterBright 9y ago
Never set up a discretionary account with a broker. The discretion thing means they can make decisions on what to buy and what to sell. In return, you pay commissions on the trades, plus a percent of the value of your portfolio. Their incentive is to trade as much as possible. This is awfully tempting, even for the most ethical broker.
emodendroket 9y ago
This is a total bummer because really, these guys would have been much better served just investing in an index fund with the schlubs than with these guys trying to sell them fancy instruments and investments in dubious businesses. Yeah, the potential return is smaller, but probably plenty.

ChuckMcM 9y ago

Agreed, look at it from their perspective. They haven't been around a lot of money before, they don't have a lot of friends who have been around a lot of money either, so they don't really know even what questions to ask to understand the people who are arguing to be their financial advisors. Perhaps major league sports would do well to help train their athletes in the basics of financial management in order to help avoid this situation.

test6554 9y ago
It's not their responsibility though. The player could take a course on their own initiative.
- specialist 9y ago
  Which courses do you recommend?
  - WalterBright 9y ago
    I'd start with a course on basic accounting, which you can get at your local community college. It's critical to be able to read and understand a financial statement, and it's not that hard, either.
- Jtsummers 9y ago
  It doesn't need to be their responsibility, it is something they could do and wouldn't cost them much. If anything it could help with their recruiting efforts: Show a list of athletes that got screwed by shady advisors; show how they'll connect you with real advisors (at established and more trusted institutions) and education to discern what options are good and what aren't. Won't make a difference when tyring to get that top QB, but it may for all those guys who're only making $150k-300k.
- ChuckMcM 9y ago
  Its true they could. I think of it like auto repair shops. Here is something really valuable to your daily life, and you want it taken care of properly, but how do you verify that the person you are talking to is honest and trustworthy? You could buy the factory service manual for your car and read it cover to cover, with digressions into the parts which are assumed to be known by anyone servicing a vehicle, and then you could evaluate an auto mechanic's answers based on a ground truth of the service manual, but how many people actually do that? 1% ? 10% ? In my experience in the Bay area with people who suddenly have more wealth than their friends and family ever did, there are two ways that people seem to split. Either they start splendiforus spending because they are "rich" or the start calculating what sort of 'burn rate' they can support drawing down at a rate of anywhere between 2% and 10% of their net worth. Using the 4% number (which used to be the standard before the great recession knocked it back to 2% for more conservative savers). One of the things that people usually don't think about deeply is that money in the bank pays you, things that you own cost you. A car needs gas, a jet needs maintenance, a home needs gardening. And when you scale up the 'thing' you scale up the cost. As a result if you live what you perceive to be a 'rich' life you may find its sucking your wealth away. There are lots of studies on lottery winners which show this effect.
  - wutbrodo 9y ago
    > In my experience in the Bay area with people who suddenly have more wealth than their friends and family ever did, there are two ways that people seem to split. Either they start splendiforus spending because they are "rich" or the start calculating what sort of 'burn rate' they can support drawing down at a rate of anywhere between 2% and 10% of their net worth. Wow that's depressing as hell. I've seen the spending side of things, but for a long time out of college I was making more money than anyone I knew and also spending towards the bottom of the distribution. I think I was 25 when my average return started covering my cost of living. My family didn't have much money growing up (due to medical reasons) and my parents don't really know much about managing money, probably because they both come from upper-class backgrounds where family money just seemed "taken care of". So I have to confess I'm not really sure where the financial irresponsibility of the sorts discussed in this post comes from. I'm tempted to say that it's a simply matter of high time preference, but that's a really self-serving explanation, so I'm not quite satisfied.
- gech 9y ago
  Everyone but myself be damned.
48snickers 9y ago
The NFL already does: https://www.marketwatch.com/story/this-nfl-training-camp-turns-football-players-into-financial-stars-2016-04-06 https://www.marketwatch.com/story/this-nfl-training-camp-tur...
jessaustin 9y ago
Like any employer, it isn't actually in leagues' interests for their employees to have financial acumen. Your boss loves to see your new $50k vehicle in the parking lot.
- Jtsummers 9y ago
  You're right, them having debt like that means they're more likely to stick around (because they can't afford to quit). But it also means they could be more mercenary (seeking out the jobs that get them out of the debt, or let them keep spending themselves into debt). Debt also puts people into compromised positions. Having worked around defense stuffs, that's an exploitable position. And people will exploit it. It's not just for government secrets either. Working on a corporate X project to make the latest and greatest self driving car? Have 6- or 7-figure debt? Someone may slide up to you in a bar and buddy up, take advantage of the desperation and get you to compromise your employer's secrets. For athletes, this means getting asked to throw games and underperform.
  - jdavis703 9y ago
    For six figure debt? I was under the impression that six figure mortgages were pretty common...
    - emodendroket 9y ago
      The picture he has in mind here is probably more like six-figure credit card debt.
      - Jtsummers 9y ago
        That’s what I had in mind. Or maybe being underwater on a mortgage or a second mortgage. But generally I meant high interest, high principle debt.
WalterBright 9y ago
The best thing a person can do in such a situation is to put the money in a savings account, and then set about learning what to do. Nobody is going to have their best interests at heart but themselves. If you want to have money, you have to learn to manage it yourself. There's not really a choice about it. Also, hire a properly licensed CPA. Make sure to listen to his advice on taxes. Don't give him a financial incentive to benefit if you follow his advice.
- kpil 9y ago
  If you put that kind of money in a savings account, the bank will call you twice a day until they have made you move the money into something more profitable (for them.)
  - WalterBright 9y ago
    Your bank will stop calling you if you threaten to move your account.
    - WalterBright 9y ago
      BTW, any sane business would put their best salesmen on dealing with their wealthier clients, and those salesmen will know that haranguing customers on the phone is hardly the best way to sell them.
      - uiri 9y ago
        Actually, you might be surprised at how often a soft no means yes, in business. Of course, in one's personal life, people try not to be rude, so a soft no is often really a hard no. An athlete or doctor or lawyer who is too busy to give the salesman the time of day might be really interested but simply too busy to make time for the call. A good salesman won't give up after the first soft no. It is often the case in these situations that persistence is polite.
        deleted 9y ago
hinkley 9y ago
It is sobering math to figure out that a million dollars is only about $25k a year for the rest of your life. A million bucks will make the rest of your life easier as long as you don't 1) spend it all and 2) don't make yourself unemployable (injury, bad PR, etc)
- magnetic 9y ago
  How are you computing that? Perhaps you are forgetting that an investment still grows while you are withdrawing from it? Here is a calculator that helps you compute how much you can actually pull from it: https://www.money-zine.com/calculators/retirement-calculators/retirement-withdrawal-calculator/ https://www.money-zine.com/calculators/retirement-calculator... If you set the initial variables to: - Retirement age 40 - Life expectancy 83 - Annual Return 7% (typical of stocks) - zero out everything else (no pension, no social security) You get about ~$74K a year. Even if you started retiring at age 25, you'd still be pulling ~$71K a year.
  - freddie_mercury 9y ago
    This is not a good way to calculate it because it ignores volatility of the investment. There are decades of publications in the topic of sequence of returns and the impact on retirement. $25,000 is likely a little too low but $70,000 is way, way too high. Most people who've done research agree that something like $25,000 to $35,000 a year from $1,000,000 is reasonable for someone retiring extremely young.
    - ChuckMcM 9y ago
      Which corresponds to 2.5 - 3.5%. Back in the 90's when I was doing my research 4.2% was the "magic" number. Of course your life expectancy has to factor in to, so if you boost your withdrawal rate as you get older you can try to hit $0 right when you die. (like timing the market, not recommended) As people point out the thing to remember is that your costs change too, your health care costs go up but if your family moves out and you pay off your house your outlays go down. "Downsizing" or reducing the owning of expensive things (especially ones that require maintenance) can really help your burn rate.
sanderjd 9y ago
Yeah, that was my thought too - don't all these sports have players' associations / unions? What in the world are they doing, if not helping with this problem?
ixacto 9y ago
This is generalizing people of different backgrounds' knowledge of securities. There are plenty of middle/upper class people who buy into idiotic mutual funds with a 3% front load fee. Wtf? Heck, many employers still offer absolute garbage funds in their 401k. I wholeheartedly agree that major league sports should provide financial management skills, however the same should also be provided at large corporations.
- bko 9y ago
  I think there is a difference between buying into a 3% front loaded mutual fund and investing in a restaurant in downtown Miami. The first is suboptimal and almost certainly won't beat the market, the other is likely to lose 100% of principal invested within a few years. I guess the equivalent for a non-wealthy person would be to invest all their money into lottery tickets.
  - ixacto 9y ago
    Suboptimal to say the least. https://investor.vanguard.com/mutual-funds/low-cost https://investor.vanguard.com/mutual-funds/low-cost With Vanguard/Fidelity/Schuab you can make only 45k/yr over your whole career, put the $5500 into an IRA in VFIAX/VOO starting at age 22, and have an retirement income of $58k/yr (not including social security) when you retire. This approximately 1.1-1.5 million in retirement is enough savings IMO, and allows you to pursue whatever career you want, e.g. nonprofit/teaching/part-time with much less anxiety than a traditional pension or more active investment like a restaurant. Maxing out an IRA is only a 12.2% pre-tax savings rate for someone with a $45k/yr income. This is not difficult at all, however it is important that it starts in the early 20s.

alvah 9y ago

I'm not convinced it's as black and white as that. Look at the example given (Rocket Ismail). Not to pick on an individual, but he doesn't seem to be taking responsibility for any of his losses, even with the supposed "hindsight" he now enjoys: -"One of his advisers pitched the idea as"fail-proof, with no downsides," Ismail recalls. He never recouped his money and has no idea what became of the restaurant." -(COZ Records) "The guy was a real good talker," says Rocket -(Cosmetics) "We were not prepared for the sharks in the beauty industry" -(Retail stores) "The main store opened up in New Orleans, but doggone Hurricane Katrina came two months later". The shops no longer exist. What strikes me about these examples is they're all supposedly somebody else's fault. To my mind, what isn't being taught (both to young athletes, and to the population in general) isn't so much personal finance, but personal responsibility.

nkrisc 9y ago
These examples mostly sound like they're about financial literacy, or at least the first thing you learn: if it sounds too good to be true, it probably is. Individually: Nothing is fail-proof. People will say anything to get your money. Business is cutthroat. And shit happens.
rconti 9y ago
I think the issue is, we're all thinking they're stupid for not realizing the risk of their investments, but maybe they do! Or maybe they recognize half or a quarter of the risk. But they don't understand the alternatives. Nobody is on the "other" side saying "invest in mutual funds!" They probably get "exciting business opportunities" and "help your friends and family" and "spend it all on hookers and blow!" and the "exciting business opportunity" might sound like the best way to keep their fortune going compared to the other options.
- richardw 9y ago
  I suspect that you're right and possibly because of the following reason: they've had a lifetime of outsize results. They were always the fastest, strongest, got the girl. Now comes along either a normal ETF with average returns, or the promise of outsized ones sold as insider tips between experts. It'd be tempting and in-character to swing for the fences.

nikanj 9y ago

I wonder how much shady side-betting these financial advisors do. It's easy to make a few hundred thousand, if you get to decide where your client invests a few million. Reminds me of the good old Goldman Sachs, who made a killing betting _against_ their clients. https://www.theguardian.com/world/2010/apr/25/goldman-sachs-senator-carl-levin https://www.theguardian.com/world/2010/apr/25/goldman-sachs-...

vostok 9y ago
I've never understood this perspective. If I buy something from Goldman then they think the price is too high and I think the price is too low. If I sell something to Goldman then they think the price is too low and I think it's too high. If they're not willing to bet against me then they'll say something like "sorry trader was off the desk". Or if they're just less willing to bet against me then they'll say "sorry mate wide atm due to volatility".
- baddox 9y ago
  I don’t think your perspective is very useful, because you seem to be assuming that all commercial transactions are zero-sum, since you describe both parties believing they are the only ones benefitting from the transaction. If I buy a $5 sandwich at a deli, it’s not the case that I think they’re suckers for valuing $5 more than the sandwich, and I doubt they think I’m a sucker for the inverse. Clearly, what’s really going on is that I am hungry and cannot eat a five dollar bill, whereas the deli has way more sandwich ingredients than they need to eat themselves, and they need money for other expenses. We both benefit.
  - vostok 9y ago
    I'm more relying on my experience in trading with Goldman and other banks than I am assuming anything. I also don't see where I said anything about zero sum games.
    - sowbug 9y ago
      FWIW, I read your comment the same zero-sum way. Perhaps it was because you used the term "the price" as if there's one price and any deviation from that value represents error. If I have three shoes, I might correctly place little value on the extra, while a person with only one shoe might correctly place a lot of value on it. My selling the shoe for anything more than $0 is rational, and the other person's buying the shoe for anything less than the price of a full pair of shoes is also rational.

WalterBright 9y ago

Never set up a discretionary account with a broker. The discretion thing means they can make decisions on what to buy and what to sell. In return, you pay commissions on the trades, plus a percent of the value of your portfolio. Their incentive is to trade as much as possible. This is awfully tempting, even for the most ethical broker.

emodendroket 9y ago

This is a total bummer because really, these guys would have been much better served just investing in an index fund with the schlubs than with these guys trying to sell them fancy instruments and investments in dubious businesses. Yeah, the potential return is smaller, but probably plenty.