Financial tip: don't mortgage your house to play the stock market

In today's Courier-Mail, the local Brisbane paper, the front-page news was that, "Caught in a crisis not of their making, these mom and dad investors are left to face financial ruin!"

Basically, a local financial advising company, called Storm Financial, advised all these folks a few years ago that since the stock market was really hot, they should all invest their life's savings, plus mortgage their homes, and invest in the stock market.

So: now the stock market is bust, and all these 61, 62, and 65 year olds are losing their homes, can't retire, and etcetera. Oh: and the company went out of business.


Yes, that's crummy -- very crummy. But, um: when someone tells you to mortgage your house to play the stock market: don't.

And if you're within a few years of retiring -- do not put all your money (or even **most** of your money!) in stocks. Depending on who you talk to, the rule of thumb is that you should have 100 minus your age, or 120 minus your age, in stocks.

• If you're 30, you should have 70% (or 90%) of your investments in stocks: you have many years until you retire, so there's plenty of time for the market to correct itself.
• If you're 60, you should have 40% (or 60%) of your investments in stocks.
• And, if you're 65, and hoping to retire, you should have 35% (or 55%) in stocks.

**Not** your life savings...


I guess what annoys me about the newspaper article is that everyone (on the front page, at least) lost a million dollars or more, each -- because they had a fair chunk of $$$, because they all used to run their own business (a couple owned a grocery store; another guy was a contractor; and another guy owned a taxicab company). So, how do successful small business folks get suckered like that....? Naive? Or just, too greedy? (tip: When someone tells you you can earn 20%-30% a year -- but there's "some risk" -- don't mortgage your house on it...)


--GG