Suze Orman tonight: did I hear right?

[asmom]

A caller stated that they borrowed 100K from the HELOC and put it in the stock market. As of today it was worth $600 and some change, is that right? I'm not sure I caught that. Can anyone clarify? Thanks.....

[disneysteve]

Yep. They took out a $100,000 loan and invested it all in one stock. It was now worth about $700. Not only that, but she said that they had debated doing it for months and the stock just kept going up and up so they finally decided to go for it.

Apparently, they then watched it go down and down and down until it was nearly worthless. Obviously, they never should have done it in the first place, but once they had, I have no idea why they didn't throw in the towel at some point and sell, like maybe when they were down to 90K or 80K. Why wait until the money is all gone?

[m3racer]

Wow is all I have to say.

[Broken Arrow]

Um, I don't mean to be critical to this person, but you just don't bet with money you can't afford to lose...

and I've always felt that it's too risky to bet on leverage as well....

It also demonstrates the dangers of betting based on past performances....

Some may even point out that it's an example of how risky it is to forego diversification....

I mean, I would never say any of this to this person because I wouldn't want to be a back-seat driver after an accident... but for the rest of us, I hope that we will profit from the experience of others so to speak.

Did I mention that an uncle of mine made stock bets that went all the way up to $1 million, only to proceed to lose $900k of it?

[disneysteve]

Um, I don't mean to be critical to this person, but you just don't bet with money you can't afford to lose...

Suze didnt get much into their overall financial picture, but the woman really didn't seem too distraught over the loss. She was calling mainly to ask about refinancing her home to reduce the interest and combine the HELOC with the first mortgage. I kind of got the impression that the 100K loss wasn't too devastating of a blow to them.

[Ima saver]

Wow, what a shock!!

[swanson719]

If you've had the financial sense to make the amount of money it takes for a $100K loss to be financially devastating it would seem you would have enough sense to know not to go all for broke on one stock.

[asmom]

Yep. They took out a $100,000 loan and invested it all in one stock. It was now worth about $700. Not only that, but she said that they had debated doing it for months and the stock just kept going up and up so they finally decided to go for it.

Apparently, they then watched it go down and down and down until it was nearly worthless. Obviously, they never should have done it in the first place, but once they had, I have no idea why they didn't throw in the towel at some point and sell, like maybe when they were down to 90K or 80K. Why wait until the money is all gone?

Oh WOW. Thanks Steve. I was having a coughing spell at the time, I thought surely I must have heard it wrong. Good grief.

[MonkeyMama]

I know someone who did the same thing. Let me just say they are idiots with money. They are always asking me about all these scammy things. They were going to lose their money one way or another... So it doesn't surprise me (I hadn't watched it yet).

[Homebody]

Just watched it myself. What is it about daylight savings time, which I love, but I just want to sleep today! That segment woke me up and here I am on the web, reminding myself why I do what I do!

I was so curious as to the stock and WHY did they just watch it go down? But then I could say that about all my friends and relatives who watched their 401K's dive.

DH and I are kicking ourselves less than most since we have invested in businesses and did not have that much in our IRAs.

[disneysteve]

WHY did they just watch it go down? But then I could say that about all my friends and relatives who watched their 401K's dive.

Most of us have watched our IRAs and 401ks drop 30-40%, but I certainly don't have a 6-figure position in any single stock and I don't have anything that is down nearly 100% since I bought it. I never would have held on that long.

[Broken Arrow]

I was so curious as to the stock and WHY did they just watch it go down? But then I could say that about all my friends and relatives who watched their 401K's dive.

Selling is actually the hardest part in a trade, especially when it comes to selling at a loss....

Nobody wants to "lock in" a loss if they can help it, especially if they somehow believe that the stock might rebound any minute. The problem that often comes up has to more to do with an irrational sense of hope for a rebound, rather than basing it on some kind of analysis and evidence of upside....

I don't know if that's what happened to this family. I didn't even watch the show. But I know this happens to a lot of people, and it's something I have to be keenly aware of within myself as well....

[tripods68]

Selling is actually the hardest part in a trade, especially when it comes to selling at a loss....

Nobody wants to "lock in" a loss if they can help it, especially if they somehow believe that the stock might rebound any minute. The problem that often comes up has to more to do with an irrational sense of hope for a rebound, rather than basing it on some kind of analysis and evidence of upside....

I don't know if that's what happened to this family. I didn't even watch the show. But I know this happens to a lot of people, and it's something I have to be keenly aware of within myself as well....

That's why it's important to put a "trigger" mechanism when the stock go down at certain price. But it is hard lesson to learn, you do not put ALL your eggs in one basket.

[rob62521]

I watched the show and wondered why they would be so careless with "borrowed" money. And Steve, I agree, she didn't seem THAT upset over losing it.

We have a friend who is retired and upset over his 401K losses so what does he do? He takes a big chunk of it and puts it in a stock that has been losing money thinking it will make a comeback. Ever since he did that, it has continued to go down until the last couple of days where it went up 4 cents. I think that perhaps the term greed plays a part in both scenarios.

[tripods68]

So what happened to the HELOC balance in the case of foreclosure? Does it get wipe out or does it become debt that remains that could be wipe out through normal bankruptcy proceeding?