WHILE READING the great books on investing, studying financial theory and reviewing our investment performance are essential to becoming a better investor, sometimes it can be useful to learn from the mistakes of others—because what not to do can be even more important than what to do. As Otto von Bismarck may have said, “Only a fool learns from his own mistakes. The wise man learns from the mistakes of others.”
Which brings me to me.
FOLKS FORGET passwords every day, an inconvenience that can usually be quickly fixed—but not always.
In January, The New York Times wrote about a German programmer living in San Francisco. A decade ago, he had been paid 7,002 bitcoins for making a video explaining how cryptocurrencies work. He stored them in a digital wallet on a hard drive and wrote the password on a piece of paper, which he has since lost.
AS A BANKER, I got a ringside seat from which to watch the many ways that people are separated from their hard-earned money. Some are illegal. Some are legal, but unethical. And many, while legal and ethical, would be unnecessary with a little more knowledge about managing money.
For me, the most disturbing experiences were when scammers extracted money from the naïve and innocent. I’ve seen the pain of customers who found out that their elderly mother had given her life savings to a manipulative TV preacher.
MAY 18, 2020, STARTED as an ordinary Monday. I was busy with office work. An email from our human resources department hit my inbox. It said something about fraudulent unemployment benefits. I couldn’t pay attention right away, so I saved it to read later.
That evening, I found five letters from our state’s unemployment claims department in the mail. I’d never heard of such a department, but it reminded me about the email I got earlier.
IN EVERY CRISIS, good people do great things and bad people, well, they do some really, really bad things. This article is about protecting yourself from the bad people. Never in my career have I seen so many scams in motion all at once.
Crooks tend to step up their game at times of crisis: Stress, change and misinformation make for the perfect backdrop, as they try to separate you from your money. Here’s a rundown of six current scams,
A RECENT ARTICLE by HumbleDollar’s fearless editor got me thinking about the potential risk of having most or all of my investments with a single brokerage firm or fund company. What happens if the company collapses? I was surprised at how little I knew about these matters after investing for nearly 30 years.
The Securities Investor Protection Act of 1970 was passed by Congress in response to some turbulence in the markets that caused a number of brokerage firms to fail.
ON DEC. 17, 2002, Harry Markopolos walked out of his Boston office wearing an oversized trench coat and a pair of white cotton gloves. His destination: the John F. Kennedy Presidential Library.
A quiet figure, Markopolos worked as the chief investment officer at a small firm that specialized in trading stock options. He had heard about a New York-based competitor that was apparently doing similar work, but with much greater success. Following his boss’s recommendation,
U.S. CREDIT CARD fraud topped $8 billion in 2015 and should surpass $12 billion next year. You can reduce your exposure to such incidents with a few simple steps. Why bother? Won’t the bank pick up the tab when unauthorized purchases show up on your account? Generally, yes, thanks to the Fair Credit Billing Act and the Electronic Fund Transfer Act. But there may be limitations on that protection, based on how quickly you notify your bank when you discover unauthorized charges.
FRAUD WEARS MANY faces. But depending on who you believe, potentially the most unusual is that of Jeanne Louise Calment. For years, the French-born Calment, who claimed to have been born in 1875, was celebrated as the world’s oldest person. By the time she died in 1997, she would have been 122— if she’d been telling the truth. New research, however, casts doubt on Calment’s claim.
The real story, it turns out, may be that Calment actually died many decades earlier—in the 1930s.
MY WIFE AND I TAKE some over-the-top precautions to protect our financial accounts. Why? After 40 years of working, our life’s savings boil down to digits stored on computers. No one anymore holds stock and bond certificates, stuffs money in mattresses or buries gold in the backyard. The integrity of those digits is all important.
Here are our 11 strategies—which go way beyond the normal account and password protection recommendations:
We only deal with major institutions.
MANY OF US HAVE little more than a weak, reused password standing between our financial assets and a remote attacker—one armed with powerful tools and a database of passwords from security breaches. This is a losing battle. It’s the most likely way for weak computer security to put our finances at risk.
Think this can’t happen to you? I’ll bet you have at least one password taken in a big security breach. A quick way to find out is entering your email address at Troy Hunt’s HaveIBeenPwned site.
THE LETTER WAS IN a mountain of mail delivered the day after my wife and I returned from holiday. “Dear David Powell, Thank you for your recent application for a Bed Bath & Beyond Mastercard account. Your request… was carefully considered, and we did not approve your application….”
I’ve never been happier to receive a rejection.
We use exactly one credit card, pay it off each month and have never applied for another. This fraudulent application,
WANT TO SEE the very worst of human nature? Look no further than financial salespeople—and the way they exploit their clients.
Incentives drive their behavior. High commissions make brokers and insurance agents do unconscionable things. The worst products contain the highest payouts. Result? Consider seven real-life examples. Names are withheld to protect the innocent and, unfortunately, also the guilty.
A widowed nurse inherited her husband’s $1 million IRA. An unscrupulous insurance salesperson convinced her to put the funds into a high-cost variable annuity.
“UNCLE” PHAN, my father’s closest friend and my godfather, committed suicide a few years ago. I regret not seeing him often enough when he was alive and not letting him know how much I appreciated his humor and generosity.
I also regret not knowing his financial and emotional situation.
Uncle Phan retired as a surgeon 20 years ago and took a lump sum distribution instead of a lifetime monthly pension. It should have been enough to last the rest of his life,
MANY FINANCIAL advisors are allowed to recommend investments that are great moneymakers for their own retirement—but not so good for those who buy them.
These salespeople are incentivized to push clients into investments that pay the highest commissions. It’s a system that jeopardizes the retirement of millions of Americans. Billions are spent annually on unnecessary fees. While the industry has many decent people, the sinners outnumber the saints. Here are just seven of their transgressions:
Variable annuities in retirement accounts.