Comments on: Beg, Borrow Or Steal. Did Seth Get It Wrong?

By: Wtblogger

Wtblogger — Tue, 05 Aug 2008 17:02:23 +0000

Borrowing money, that’s a dangerous thing that we should avoid.Today we borrow from here, tomorrow we borrow from there to pay back here and soo on. I dont’ know, maybe it’s better to beg, because no one will ask you to give money back…

By: J David

J David — Mon, 30 Jun 2008 01:01:51 +0000

Unless you are a professional day trader, you should never just buy individual stocks. Big funds (like Vanguard) are run by serious pros who diversify and protect your investment. Hell, you could even buy funds that mirror the major indexes and still do well. I am sure that Seth meant things more like funds, rather than buying individual stocks.

By: nordsieck

nordsieck — Fri, 13 Jun 2008 14:32:36 +0000

Two words: Expected Value.

All of the examples you give are risky (have high variance), but have positive expected value. Needlessly conflating the issues makes understanding the core issues more difficult.

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Pages tagged "staunch" — Thu, 12 Jun 2008 02:53:27 +0000

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By: Shama Hyder

Shama Hyder — Wed, 11 Jun 2008 23:12:30 +0000

Enron is one word silly. = )

On a more serious note, I think you are right on. Hindsight is always 20-20, however, there is a pinch of truth to Seth’s comment.

One word (since we are playing that game! = ): Prudence.

Don’t use your credit card to buy clothes you can’t afford. That only goes DOWN in value.

By: Mark

Mark — Wed, 11 Jun 2008 19:01:19 +0000

I think that many of you are missing Seth’s point, and I think it is because of the way he worded the advice.

He said, “Only borrow money to pay for things that increase in value.”

He would have been better off saying, “Don’t borrow for things that don’t increase in value.” This was the point that he was trying to get at.

By: Lane Lester

Lane Lester — Wed, 11 Jun 2008 18:36:14 +0000

Sometimes there are intangibles that will influence a decision. It might make financial sense to rent, rather than buy, a house. But for me, house ownership is more than an investment. It’s a place to call “my home” (even if the bank is the majority shareholder). It’s a place I can improve according to my tastes and know someone else isn’t going to chase me off at his whim (something I had a landlord do to me).

By: Lisa

Lisa — Wed, 11 Jun 2008 18:23:47 +0000

I’m with you, Jonathan. I read Seth’s post yesterday and thought, “Great advice – unless you want to do something no one else has ever done.” Don’t we all know someone who has run up personal credit card debt to make a go of a new business –and succeeded? Or bought a house in a lousy neighborhood, invested sweat equity and sold it for a tighty profit during a gentrification period? Or taken a job on the promise of stock options and cashed out big at the age of 29?

A lot of life’s most valuable investments start with faith. Some people have gone bankrupt that way, others have made millions. While the list of success factors in these cases is long and varied, I suspect it does NOT include “being debt-free.”

By: Pamela Mitchell

Pamela Mitchell — Wed, 11 Jun 2008 18:22:06 +0000

I think what’s missing in Seth’s statement, and what you’re alluding to in your post, Jonathan, is role that risk assessment plays in determining whether or not to assume debt. Seth’s statement doesn’t work because he’s made a blanket assumption that doesn’t account for risk. And what you’re saying is that it’s easy to assess historical risk, much more difficult to assess future risk.

Nearly all entrepreneurs decide that passion is worth taking a risk. But most successful entrepreneurs believe in taking measured risks, with a pre-defined limit (however high) on upside exposure.

Great topic!

P.S. Seth’s advice to eat brown rice and beans and send every extra dollar to the credit card companies until you’re out of debt is truly grim. Better to cut back and send an equal amount to the CC firms and to your own bank account. By saving, you’ll have a fund to turn to if there’s an emergency. Otherwise, you could be forced to run up the card again, making debt repayment a Sisyphean task….

By: Nathan Bowers

Nathan Bowers — Wed, 11 Jun 2008 17:47:18 +0000

Borrowing money to invest in stocks is a terrible idea. Hell, investing in stocks in general is a terrible idea. I’m talking about *picking* stocks here. Investing in no load index funds is a *good* idea because the economy grows over time. Picking stocks is dumb because you’re only human. You’re likely to get caught up in emotion, chasing losses, etc… and it only takes one bad mistake to wipe out your gains.

Check out this podcast by John Bogle, inventor of index funds at Vanguard: http://www.econtalk.org/archives/2007/04/bogle_on_invest.html