Schleppers
Whenever I receive an email from a Schleppy organization, it promptly goes in the trash bin. It’s not that I’m worried about viruses from someone trying to sell me something, I just don’t want to encourage them to send me more.
It seems that every other day I get something from the Motley Fool, one of the Schleppiest, telling me that if I just subscribe to their newsletter I can get 50% returns or 43% annual dividends. While that sounds appealing, I’m much to skeptical to read any further.
However, my wife isn’t. Not that she will fall for such false claims; she is just curious enough to keep reading. Luckily for me, she has absorbed enough finance through my rants to figure out, relatively quickly, the error in the Motley Fool’s claims.
Their claim of 43% dividends went like this: buy a stock, wait a few years, and you will eventually earn a huge cash return on your initial investment. The idea is that the initial investment will not have a large dividend, but after years of growth in the price of the stock, the dividend will be huge compared to the initial investment.
The problem with this, my wife pointed out, is that the 43% is completely misleading. No one ever earns a 43% dividend return in any year. The right reference for the capital invested is not the original capital invested but the current price of the capital. This is the opportunity cost of the capital.
Before you get sucked into the many misleading claims in your inbox, there are two good options: (1) spend time figuring out the flaw in their reasoning, or my favorite (2) press delete.
