Why I Ignore Most Financial Advice (And You Should Too)
Why Following Professional Advice Often Makes You Poorer
The Bottom Line Up Front: Most "common sense" financial advice was designed for a world that no longer exists. Following it today will keep you working until you die while making other people rich.
I'm about to make a lot of people angry.
The financial advice industry is built on outdated assumptions, conflicts of interest, and myths that benefit everyone except the people following the advice. Meanwhile, terrible guidance gets repeated so often it becomes "common knowledge" that nobody questions.
Today we're going to examine the worst financial advice that's still being passed around as wisdom. Some of it was reasonable decades ago but makes no sense today. Some of it was always wrong but serves the interests of people making money from your financial decisions.
Fair warning: If you've been following conventional financial advice, you're probably not going to like what I have to say. But if you want to build real wealth instead of making your bank and financial advisor rich, keep reading.
"You Need to Build Your Credit Score"
The Advice: Focus on building an excellent credit score by keeping credit cards open, maintaining low utilization, and paying just enough to show activity.
Why It's Wrong: Credit scores measure how profitable you are to lenders, not how wealthy you are. The highest credit scores often belong to people who are perpetually in debt.
The Reality:
People with 850 credit scores often have car payments, credit card balances, and maximum mortgages
Wealthy people frequently have mediocre credit scores because they don't borrow money
Credit scores encourage you to view debt as normal and necessary
What You Should Do Instead: Build wealth, not credit scores. Pay cash for cars, keep minimal debt, and only worry about your credit score when you're actually buying a house. A 720 credit score gets you the same interest rates as an 850 in most cases.
Who Benefits from This Advice: Banks, credit card companies, and anyone in the lending industry. They want you to be a profitable customer, not a wealthy person.
Important note: I am not saying to miss payments and tank your score. I am saying don’t take on debt because you think it will build your credit score. The only reasonable use of debt is to buy a house and you shouldn’t doing that very often. If you’re a renter, stay debt free and stop worrying about your credit score.
"Invest in a 60/40 Portfolio"
The Advice: Put 60% of your money in stocks and 40% in bonds for a "balanced" portfolio that provides steady growth with reduced risk.
Why It's Wrong: This advice was created when bonds paid significantly more interest. In 1981, 30-year treasuries yielded 15%. Today the 30-year treasury yields less than 5%. With stocks historically returning 10%, you're dramatically reducing your long-term returns for minimal risk reduction.
Also, the 60/40 portfolio worked in a time (1980-2021) where interest rates (and therefore bond yields) were in decline. This boosted the return for existing bonds. This performance is unlikely to repeat since rates are much lower than in 1981.
The Math:
60/40 portfolio historical return: ~8% annually
All-stock portfolio historical return: ~10% annually
Over 30 years, that 2% difference turns $100,000 into $1.0 million vs. $1.7 million
Modern Reality:
Bonds and stocks increasingly move together during crises (previously they were inverse)
The "diversification benefit" has largely disappeared
Young investors have decades to ride out stock market volatility (so why dilute your return with bonds?)
What You Should Do Instead: If you're under 50 and investing for retirement, use a 90-100% stock allocation. Add bonds only as you approach retirement and need to reduce volatility.
Who Benefits from This Advice: Financial advisors who can sell you more complex products and justify their fees by "managing" your "sophisticated" asset allocation.
Important note: I am not suggesting you keep 100% stocks in your 70s and 80s. Bonds have a role to play once you are drawing down your portfolio to avoid selling stocks during a trough. I am suggesting maintaining 100% stocks during the accumulation phase and adding bonds just before retirement.
"Max Out Your 401(k) Before Doing Anything Else"
The Advice: Always contribute the maximum to your 401(k) before any other investing because of the tax advantages.
Why It's Partially Wrong: This ignores fund quality, fees, and accessibility. Many 401(k) plans have terrible, high-fee investment options that can cost you hundreds of thousands over time.
The Nuanced Reality:
Contribute enough to get the full employer match (this is free money)
Then evaluate your 401(k) options - if they're expensive or limited, max out your IRA first
Only max the 401(k) if the investment options are decent
The Fee Problem:
Bad 401(k) fund: 1.5% annual fees
Good IRA index fund: 0.05% annual fees
Over 30 years, that 1.45% difference costs you about 30% of your returns
What You Should Do Instead: Contribute to get the match, then prioritize accounts with the best investment options, regardless of the account type.
Who Benefits from This Advice: 401(k) providers who make money from high fees and limited investment choices.
Important note: If you make six figures, max our your 401(k). If you make less and need to choose between the 401(k) and and IRA, check your investment options. Many larger employers have excellent fund options, but I often see smaller employers with inferior choices. If the 401(k) funds are expensive, fill the IRA after you hit the match.
"Dollar-Cost Averaging is Always Better Than Lump Sum Investing"
The Advice: Spread out your investments over time to reduce risk and smooth out market volatility.
Why It's Wrong: Markets go up about 70% of the time. Delaying investment to "smooth volatility" means you miss gains more often than you avoid losses.
The Research: Studies show lump sum investing beats dollar-cost averaging about 68% of the time. (source) The longer you delay, the more likely you are to miss gains.
When DCA Makes Sense:
When you're receiving income over time (like from paychecks)
When you're psychologically unable to invest a lump sum due to fear
When you genuinely can't afford to lose the money in the short term
When It Doesn't:
When you have a large amount sitting in cash "waiting for the right time"
When you're trying to time the market by spreading purchases out
What You Should Do Instead: If you have money to invest, invest it. Time in the market beats timing the market.
Who Benefits from This Advice: Investment platforms that want you to keep cash with them longer, and nervous investors who feel better about terrible timing.
Not So Fun Fact: Most brokerages make money on your uninvested cash. Check the expense ratio on your money market fund or the yield on your FDIC cash and you can figure out their cut of the return.
"Real Estate is Always a Good Investment"
I wrote a longer post on real estate versus index funds if you want to see the full version.
The Advice: Buy real estate because "they're not making any more land" and property values always go up over time.
Why It's Wrong:
Property values don’t always go up (2007-2010, 2025)
Significant capital requirements (20-25% down payments)
Transaction costs eat heavily into returns (6-10% to buy and sell)
Maintenance, taxes, and management reduce returns
Real estate is not liquid and concentrates your wealth geographically
The Historical Reality: From 1890-2004, US housing prices increased 0.4% annually after inflation. (source) The 2000s housing boom was an aberration, not the norm. I fully admit we’re in the midst of a housing shortage in 2025 and prices are again growing. That’s because we’re under-building housing. If we start building again at historical rates, prices will fall back in line.
When Real Estate Makes Sense:
When you can buy below market value
When you enjoy active management
When you want current cash flow
When you have substantial capital and local expertise
What You Should Do Instead: Buy index funds for passive wealth building. Buy real estate only if you want to be an active investor and understand it's not a guaranteed winner.
Who Benefits from This Advice: Real estate agents, mortgage brokers, and real estate investment "gurus" selling courses.
Important Note: I’m not saying real estate can’t be a successful path to financial independence. It very much can. I’m simply saying that real estate isn’t the guaranteed investment so many in the industry make it out to be.
"You Need Life Insurance as an Investment"
The Advice: Whole life, universal life, or variable life insurance policies are great investments that provide both protection and tax-free growth.
Why It's Wrong:
Life insurance investments typically return 2-4% annually due to high fees
You could get term life insurance for 90% less cost and invest the difference
The "tax advantages" don't offset the terrible returns
These products are incredibly complex and favor the insurance company
The Math:
$500/month whole life policy: ~$6,000 annually
$50/month term life + $450/month investing: Same protection, much better returns
What You Should Do Instead: Buy term life insurance if you have dependents. Invest the difference in low-cost index funds. Never mix insurance and investing.
Who Benefits from This Advice: Insurance salespeople who earn massive commissions on these products.
"Carry a Small Credit Card Balance to Build Credit"
I addressed how little your credit score matters up above, but this is worth calling out separately as a falsehood.
The Advice: Keep a small balance on your credit cards and pay it off slowly to show lenders you can manage debt responsibly.
Why It's Wrong: This costs you money for zero benefit. Credit scoring models don't reward you for paying interest.
The Reality:
Paying your balance in full every month is optimal for credit scores
Credit utilization should be under 10%, ideally under 1%
You never need to pay interest to build credit
This advice costs people thousands annually in unnecessary interest
What You Should Do Instead: Pay your credit card balance in full every month. If you want to optimize your credit score, keep utilization low but never pay interest.
Who Benefits from This Advice: Credit card companies who make money from interest payments.
"You Need a Financial Advisor"
The Advice: Professional financial management is worth the cost because advisors have expertise you don't and can get better returns.
Why It's Often Wrong:
90% of professional fund managers can't beat simple index funds over time
Advisor fees (1-2% annually) compound against you for decades
Most "advice" is just selling you products that benefit the advisor
Modern investing is simple enough that most people don't need professional help
The Fee Impact: A 1% annual advisory fee costs you about 25% of your total returns over 30 years. That means your $1 million portfolio becomes $750,000 because of fees.
When You Might Need Help:
Complex tax situations (business ownership, large inheritance)
Estate planning for substantial assets
Behavioral coaching if you can't stick to a plan
What You Should Do Instead: Learn the basics yourself (it's not complicated), use low-cost index funds, and hire fee-only advisors for specific situations, not ongoing management.
Who Benefits from This Advice: Financial advisors who charge ongoing fees for basic portfolio management.
"Diversify Into Alternative Investments"
I wrote a longer post on bad investments earlier.
The Advice: Add gold, cryptocurrency, commodities, hedge funds, or other "alternative" investments to your portfolio for better diversification.
Why It's Wrong:
Most alternatives don't provide meaningful diversification during crises
They often come with high fees and poor liquidity
They're usually sold when they're expensive (peak hype)
Simple stock/bond portfolios already provide excellent diversification
The Track Record:
Gold’s annual return since 1980 is ~3% annually. This barely beats inflation.
Most hedge funds underperform index funds after fees
Commodities are extremely volatile with poor long-term returns
Cryptocurrency is pure speculation, not investing
What You Should Do Instead: Get your diversification from broad market index funds that own thousands of companies across all sectors and geographies.
Who Benefits from This Advice: People selling alternative investment products with high fees and commissions.
"Pay Off Your Mortgage Early"
The Advice: Owning your home free and clear provides security and guaranteed returns equal to your mortgage rate.
Why It's Partially Wrong: This ties up large amounts of capital in an illiquid, non-diversified asset that historically returns about 3% annually.
The Opportunity Cost:
4% mortgage vs. 10% stock market returns = 6% opportunity cost annually
On a $300,000 mortgage, that's $18,000 per year in missed gains
Over 15 years, the difference is hundreds of thousands of dollars
When It Makes Sense:
High mortgage rates (above 6-7%)
You're close to retirement and want reduced cash flow needs
You value the psychological benefit more than optimal returns
You're terrible at investing and would spend the money instead
What You Should Do Instead: Keep low-rate mortgages and invest the difference in index funds. Your future self will thank you.
Who Benefits from This Advice: People who are scared of investing and prefer guaranteed mediocre returns to probable excellent returns.
Important Note: Paying off your mortgage isn’t “bad”. It’s just mathematically inferior. That doesn’t mean it isn’t the right choice for you personally depending on your risk tolerance.
Why Bad Advice Persists
Cognitive Biases:
Authority bias: We assume "experts" know better
Confirmation bias: We seek advice that confirms what we want to believe
Complexity bias: We think complicated strategies must be better
Conflicts of Interest:
Advisors make money from products, not performance
Media needs advertisers (banks, investment companies, insurance companies)
"Free" advice often comes from people selling something
Outdated Assumptions:
Much advice was created when pensions were common, Social Security was reliable, life spans were shorter, and bonds had high returns
Interest rates, regulations, and markets have changed dramatically
Technology has made investing much simpler and cheaper
Fear-Based Marketing:
"You need professional help because investing is complicated"
"You'll make emotional mistakes without guidance"
"This special product protects you from market crashes"
The Simple Truth About Building Wealth
Real wealth building is boring:
Spend less than you earn
Invest the difference in low-cost index funds
Do this consistently for decades
Don't get distracted by complex strategies or market timing
That's it. No special products, no professional management, no alternative investments, no complex strategies.
Why doesn't everyone do this?
It's too simple to sell
It doesn't make advisors rich
It requires patience and discipline
It's not exciting or complicated enough to feel "sophisticated"
How to Avoid Bad Advice
Red Flags:
Anyone trying to sell you something
Advice that seems too complicated to understand
Promises of guaranteed high returns or "beating the market"
Pressure to act quickly ("limited time offer")
Focus on products rather than principles
Better Sources:
Academic research from universities
Historical market data
Simple, low-cost investment platforms
People who have actually achieved financial independence (shameless plug for me?)
Questions to Ask:
How does this person make money?
What are the total costs and fees?
What's the simplest way to achieve this goal?
What does the historical data actually show?
The Bottom Line
Most financial advice is designed to benefit the person giving it, not the person receiving it.
The investment industry has convinced people that wealth building is complicated and requires professional help. It's not, and it doesn't.
The best financial advice is usually the simplest:
Avoid debt (especially high-interest debt)
Live below your means
Invest in low-cost index funds
Be patient and consistent
Everything else is either complexity for its own sake or someone trying to make money from your financial decisions.
Stop following advice that makes other people rich at your expense. Start following the simple strategies that actually build wealth over time.
Your future financially independent self will thank you for ignoring the noise and focusing on what actually works.
What's the worst financial advice you've ever received? Have you fallen for any of these myths? The comments are a great place to share your experiences and help others avoid the same mistakes.