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Woodsy · 09-30-2008, 10:11 AM

Chip...

Investing is not like a savings account that will pay a fixed rate... Investing is more like gambling, but with better odds! (usually)

Lets say you put $25 week/$100 a month into the US College Mutual Fund managed by CheezWhiz Brothers Financial. You did the research and at the time you started investing 18 years ago, it was a good fund returning 15% average on your investment... essentially the share value of the fund increased by 15% on average... over 18 years your cash contribution was $21,600... but because the fund has performed well you have more than doubled your money. What your really doing is buying shares of a fund...

Over the 18 years you have been investing you have accumulated 1000 shares of stock and its currently @ $100 share on NYSE

But what you don't know is the CheezWhiz made some questionable investing decisions with the fund money, investing the fund money in other companies who were buying and selling questionable loans... and for awhile this was a good idea, as the values of the companies the fund invested in rose! SO did the stock price of the US College Fund to its current $100 per share price...

But then the bubble popped. The value of the companies the fund invested in starts to plummet because those companies made bad investments themselves! The US College Mutual fund value (that you invested in) was trading at $100 a share starts to plummett as well. So the share price drops from $100 to $70 overnight... so your money vaporizes.... POOF!

Now have that scenario occur to millions of people and then you get why the bailout is a bitter but necessary evil....

Woodsy

09-30-2008, 10:11 AM	#85
Woodsy Senior Member Join Date: May 2004 Location: Weirs Beach Posts: 1,949 Thanks: 80 Thanked 969 Times in 432 Posts	Chip... Investing is not like a savings account that will pay a fixed rate... Investing is more like gambling, but with better odds! (usually) Lets say you put $25 week/$100 a month into the US College Mutual Fund managed by CheezWhiz Brothers Financial. You did the research and at the time you started investing 18 years ago, it was a good fund returning 15% average on your investment... essentially the share value of the fund increased by 15% on average... over 18 years your cash contribution was $21,600... but because the fund has performed well you have more than doubled your money. What your really doing is buying shares of a fund... Over the 18 years you have been investing you have accumulated 1000 shares of stock and its currently @ $100 share on NYSE But what you don't know is the CheezWhiz made some questionable investing decisions with the fund money, investing the fund money in other companies who were buying and selling questionable loans... and for awhile this was a good idea, as the values of the companies the fund invested in rose! SO did the stock price of the US College Fund to its current $100 per share price... But then the bubble popped. The value of the companies the fund invested in starts to plummet because those companies made bad investments themselves! The US College Mutual fund value (that you invested in) was trading at $100 a share starts to plummett as well. So the share price drops from $100 to $70 overnight... so your money vaporizes.... POOF! Now have that scenario occur to millions of people and then you get why the bailout is a bitter but necessary evil.... Woodsy __________________ The only way to eliminate ignorant behavior is through education. You can't fix stupid.