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Wife's Job, Entire 401(k) Disappear Along With A Good Cause

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To anyone who cares to comment after reading the above article:

 

If you were offerred the opportunty to invest your life savings with a world famous investment manager

 

who promised a long term annual rate of return which would match or slightly exceed the S & P 500 (10-12%) with full liquidity upon demand

 

without any volatility inherent in equities and

 

with no management fee

 

Would you take it?

 

 

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For the record - Bernie Madoff was not a world famous investment manager.

 

I'd never heard of him and I talk and rub shoulders with lots of planners, advisors, wealth managers, whatever they call themselves these days.

 

If I was offered such a deal (and I am almost weekly by some idiot who has built a better mouse trap) I turn them down.

 

Why is it that the firms that actually did due diligence didn't invest - the one's that just trusted the guy because his neighbor was in it DID invest.

 

Don't get me wrong, I don't believe these people deserved what they got - but they have got to take some responsibility.

 

ScottyD

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For the record - Bernie Madoff was not a world famous investment manager.

 

I'd never heard of him and I talk and rub shoulders with lots of planners, advisors, wealth managers, whatever they call themselves these days.

 

If I was offered such a deal (and I am almost weekly by some idiot who has built a better mouse trap) I turn them down.

 

Why is it that the firms that actually did due diligence didn't invest - the one's that just trusted the guy because his neighbor was in it DID invest.

 

Don't get me wrong, I don't believe these people deserved what they got - but they have got to take some responsibility.

 

ScottyD

 

 

If you havent heard of him maybe its because you are on the West coast where you dont get to rub shoulders with those investors who invested with Bernie: HSBC (1B), Fairfield Greenwich Advisors (7.5B), Tremont capital management (3.3B), Banco Santander (2.87B), Ascot partners (1.8B), Access Intl. Advisors (1.4B), Fortis Bank NV (1.35B), Union Bancaire (1.0), Royal Bank of Scotland 500M, etc.

 

Not to mention that the SEC consulted him from time to time on trading matters.

 

The back story is that some of his investors were suspicious about his investment strategies but didnt want to know whether they were legitimate because they were happy with the results.

 

 

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Perhaps, however a legend cannot exist on a single coast (though I guess he could be an East Coast legend). Donald Trump didn't know who the guy was - said he was his club a few times and Madoff asked him to invest in his fund, Trump wondered "who is this guy". He's no legend, normal people or at least normal advisors would have heard of him.

 

ScottyD

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Perhaps, however a legend cannot exist on a single coast (though I guess he could be an East Coast legend). Donald Trump didn't know who the guy was - said he was his club a few times and Madoff asked him to invest in his fund, Trump wondered "who is this guy". He's no legend, normal people or at least normal advisors would have heard of him.

 

ScottyD

 

 

According to NPR Eliot Spitzer knows who he is because Spitzer has stated that his family's RE firm invested money with Madoff.

 

Obviously you are not aware of the Donald's oft repeated statement that he only invests in RE which explains his ignorance of Madoff.

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If you were offerred the opportunty to invest your life savings with a world famous investment manager

 

who promised a long term annual rate of return which would match . . . . . . the S & P 500 (10-12%) with full liquidity upon demand

 

without any volatility . . . . . (other than that ) . . . . . inherent in equities and

 

with . . . . . (almost) . . . . . no management fee

 

Would you take it?

 

 

I changed a couple areas in Intruder's post(hope you don't mind), because he makes a great point. Almost anyone would jump at the proposition of "guaranteed" superior returns, but few people seem eager to jump and the next best thing.

 

My changes are indicated with (Parentheses) or . . . . . . . . .

 

Funny how so few people actually choose this option - investing with idex funds through Vanguard or Fidelity.

My favorite quote from Bogle's "Little book of common sense investing":

 

"The greatest enemy of a good plan is the dream of a perfect plan - stick to the good plan."

 

I do feel for the people who were stolen from, but, yet another reminder that simply paying almost nothing to be perfectly average over the course of 30+ years will make you far, far above average in the end.

 

 

 

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If you were offerred the opportunty to invest your life savings with a world famous investment manager

 

who promised a long term annual rate of return which would match . . . . . . the S & P 500 (10-12%) with full liquidity upon demand

 

without any volatility . . . . . (other than that ) . . . . . inherent in equities and

 

with . . . . . (almost) . . . . . no management fee

 

Would you take it?

 

 

I changed a couple areas in Intruder's post(hope you don't mind), because he makes a great point. Almost anyone would jump at the proposition of "guaranteed" superior returns, but few people seem eager to jump and the next best thing.

 

My changes are indicated with (Parentheses) or . . . . . . . . .

 

Funny how so few people actually choose this option - investing with idex funds through Vanguard or Fidelity.

My favorite quote from Bogle's "Little book of common sense investing":

 

"The greatest enemy of a good plan is the dream of a perfect plan - stick to the good plan."

 

I do feel for the people who were stolen from, but, yet another reminder that simply paying almost nothing to be perfectly average over the course of 30+ years will make you far, far above average in the end.

 

 

 

kev,

WONDERFUL post. Its that simple and it’s that simple to recognize in a second the scoundrels and their guarantees among the investment world. It is very dangerous out there. Stock market is very risky, even with the indexing approach. It is still risky because there are no guarantees.

Keep up the great work.

Regards,

Steve

 

 

 

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Kev:

 

I dont mind your changes if they were correct but according to what has been reported Madoff did not charge a managment fee for his investment fund. He made his profits from a high volume of brokerage commissions/spreads derived from trading on the investments in the fund. Madoff was one of the first to develop a electronic trading network that matched buyers and sellers outside of the stock exhange for very small commissions. The trading business was very profitable because it traded large blocks of stocks, such as 100,000 shares in a single trade.

 

Also Madoff's fund avoided volatility because he claimed that his secret trading strategy ("Black Box") used options and futures to eliminate the volatility inherent in owning equities. Investors gave him their life savings and endowment funds because they though there was there was no risk of decline in value. At least one financial institution who reviewed his investment returns determined after analysis (known as "due dilligence") that it could not to replicate his rate of return based on actual reported prices for the securities that he traded which was the reason for declining to allow its clients to invest in Madoff's fund.

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Intruder -

 

Sorry, did not mean that what you said was incorrect about Madhoff. You are right on Madhoff and what people assumed they were investing in.

 

I just meant that every person has access to market matching returns, without risk beyond that inherent in all equity investing, and they can do it for virtually no fee - and yet, that is never "enough."

 

The majority of people are so busy chasing things that do not exist, that they simply overlook the closest thing to the perfect plan - the good plan.

 

It is IMPOSSIBLE to invest in equities without taking on the proportional risk of that investment. However, you can eliminate taking on additional risk, above that which is inherent in the equities you invest in. You can eliminate that additional risk for almost no fee, and, in return, you can exceed the returns of most other investor's by simply being average.

 

What I was getting at is that as great (and utterly rediculous) as what was being promised by Madhoff seemed to be, EVERYONE can get almost that return, for almost no expense, and take on only the lowest risk inherent in the investment of choice - Index funds.

 

But - as you kind of alluded to, that just is not enough. People want to think they can have it all, for free, with no risk. When something defies all known laws of a particular subject, well, it is simply too good to be true.

 

Kind of like, "Eat whatever you want, never exercise, and lose weight."

 

People love to believe the things they WISH were true.

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Where can I sign up for that diet, I'm starved and I want to lose weight for the holidays.

 

Madoff and his clients validated the old adage" If something appears too good to be true, it is."

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"Eat whatever you want, never exercise, and lose weight."

 

I think I am on that diet, just not the losing weight part.

 

It's the high fat, high sodium, high carb, high calorie, hi how are ya diet. For me, anything that says "low ___" or "reduced _____" or "healthy _____" etc. are big red flags to stay away from! Won't this be the next popular diet trend?

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