All Else Equal: Making Better Decisions
Ep43 Examining Bad Investment Advice
Apr 17, 2024
Finance professors evaluate bad investing advice from Suze Orman, refinancing, and stock dilution. They explore time value of money, debunk misconceptions about stock dilution, and analyze dollar cost averaging. The discussion challenges common financial errors and highlights the importance of mastering fundamental financial principles.
22:56
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Quick takeaways
- Refinancing at a lower rate always leads to better financial outcomes, contradicting the advice against it.
- Issuing new shares does not devalue existing shares, challenging the misconception of stock dilution.
Deep dives
Refinancing Mortgages - The Time Value of Money
Refinancing mortgages can sometimes be advised against, stating that it may not be beneficial even at a lower interest rate due to an extended payment period. However, this advice contradicts the basic finance principle of the time value of money. Refinancing at a lower rate without additional fees will always lead to better financial outcomes. This is supported by the fundamental principles of comparing cash flows occurring at the same time and the effects of interest rates on cash flows.
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