My Invitation to Pyramid Scheme-dom
Last night I went to a finance pyramid scheme thing. A friend of mine is in it and his “mentor” asked him to bring one of his friends who was interested in financial stuff. I realized pretty quickly, when he asked over the weekend, that this was one of those things that I was not interested in, but he’d look bad if he didn’t invite someone. I agreed because I had nothing else planned and I was somewhat curious…and he brought beer to my party a couple weeks ago.
The set-up is that you make your money off of securities trades and when people roll over 401Ks into IRAs and that sort of thing. The only thing that I learned was that when you leave a company, you should always roll over your 401K and not leave it in the hands of the company. Once it’s rolled over, you have better access to it. They gave an example of when MCI folded and how there are still people who are having a hard time getting their 401K under their own control.
Other than that, they only talked about the money that “we” could make and it was very much like one would expect it to be. There was one thing that was said, though, that jumped out at me as being stupid. One guy (I say “guy” instead of “man” because the guys in charge are only three years older than me) said that the mutual funds they offer have a terrific past performance over many years. That’s all well and good to hear if you don’t know that you can’t rely on past performance when choosing investments. I went to a Ric Edelman seminar a little over a year ago (and I own or have read almost all his books) and that was one of the things that he stressed. Everything fluctuates! Everything that goes up must come down, after all. Edelman showed how over the years there is no pattern for when something might sink/rise, so predictions based on past performance are little better than guesses.
So hearing that from these guys did not impress me; neither did their claim that they want to help middle-class people make money and reach their goals. If that were the case, they would have focused more on the job itself, rather than on how much money can be made from it.
