ShmoopTube

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finance a la shmoop what are unsuitable recommendations I'm putting little old

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ladies in extremely risky venture capital investments that likely don't [Old lady cartoon travels along ventural capital timeline]

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get liquid for a decade yeah that's unsuitable putting the whole

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portfolio of twenty-eight year olds in US government short term paper [28 year old portfolio opens]

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unsuitable telling anyone to buy lottery tickets unsuitable the basic idea is

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that if you are guiding a client as their investment advisor you have to you

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know do right by them so that you match their tolerance for risk and reward

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hunger for the reward there yet in investment packages that make sense [Risk and reward on a balance beam]

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old people for the most part just want to live their golden years in peace so

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that they don't have to lean on their kids for financial support do they care [Children sitting on sofa]

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whether they make twenty times their money on an investment in ten years no

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at least probably none is by the time the investments pay off they'll likely

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be doing backstroke Six Feet Under you know on a gentle sloping hill with a [Man points to gravestone]

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view of the babbling brook or be so old and well they won't know the difference

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yeah so they want their money safe just to keep up with inflation maybe a little [Elderly man sitting in rocking chair]

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bit better than that and they want it to be managed with low risk until you know

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the end young people have kind of the opposite concern ie not taking enough [Young girl holding bonds]

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risk being too safe and just owning safe US government paper well that has them

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losing buying power over time after tax three percent government paper a tax

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that ordinary income is something less than two percent and if inflation is now

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three percent while they're losing a point a year in buying power and with

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20-somethings they have something like fifty years before they really have to

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worry about drawing on their savings so they can handle this ups downs sideways

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but over long periods of time the market goes up like think about where it [Market price increases]

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was 50 years ago relative to today and while they go via one path or another

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from here to here and the bottom line is that the recommendations financial

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advisers give their clients have to be suitable for the key elements of their

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life their stage in life like your age their level of wealth their tolerance [List of considerations appear]

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for risk and a whole bunch of other things that make the market a lot more

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like this than like and trust us you don't want to crap out

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it feels a you know crappy [Young girl playing craps at a casino]

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