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Suze Orman says “Don’t follow this financial advice”

Talking Numbers

Suze Orman lays out three common pieces of financial advice that could actually be bad for your portfolio.

In this day and age, there is certainly no shortage of personal financial advice going around. However, there is also no shortage of bad personal financial advice. So with so much information out there, how do you separate advice you should follow from advice you should shun?

You enlist the help of the world’s most respected and followed voice on the subject: Suze Orman.

Suze Orman, is the two-time Emmy Award-winning host of The Suze Orman Show on CNBC. And, she’s the author of nine back-to-back New York Times bestsellers, so it’s safe to say that she literally wrote the book on personal finance. So, when Suze gives advice on what to do – and her warning on what NOT to do, we’re listening.

(Watch: Suze Orman changes homebuying advice)

In an exclusive interview with Talking Numbers, Suze lays out the three worst pieces of advice other personal finance “experts” routinely give, and you want to remember them, because these common mistakes could be detrimental to your portfolio’s health. So here’s what you need to steer clear of.

(Watch: Suze Orman on financial pressure points)

Suze Orman’s list of things to avoid:

1. Whole life insurance as investment

Suze says: “What’s sad is that [people] see a financial advisor or an insurance agent [who says], ‘I know, you do two things: you can protect your family by buying whole life, universal [life], or variable life insurance and, at the same time, you can invest. So you can have your cake and eat it, too.’”

“Are you kidding me, people? That is one of the worst investments you will ever make in your life!

“Insurance should be insurance and investments should be investments. If you need insurance, the only type of insurance you should buy is term insurance, in most cases. And if you want to invest, stay away from insurance. Do stocks, mutual funds, ETFs (exchange-traded funds)… whatever’s out there but don’t use an insurance policy as an investment.”

2. Immediate annuities

Suze says: “Right now, interests are still relatively low even though they’re headed up probably. We still have one of the lowest interest rate environments ever.

So now what’s happening is you have all of these financial advisors preying on the fear – especially of the retired – of low interest rates and saying, ‘If you just invest your money in an immediate annuity or a life income stream annuity which will pay you a monthly income for the rest of your life…’ – and they give you this big figure it will pay you – ‘that is how you should take care of your retirement.’

“Again: The worst investment you will ever make. You are locking in the lowest interest rates that we’ve had in a really long time. You don’t want to do that.

“They reason that they’re able to give you more than you can get somewhere else is they are giving back your principal to you. You want to make it so you invest your money to take advantage of higher interest rates in the future and doing an immediate annuity is not the way to go.”

3. Bond Mutual Funds

Suze says: “Again, staying with the same theme of interest rates increasing: Everybody knows that when interest rates go up, the value of bonds go down.

“If you are going to buy a bond mutual fund, you have to be very careful because if interest rates go up, the value of that bond mutual fund will go down. And, in a mutual fund, there is absolutely not maturity date.

“So, what are you thinking? The worst thing you could do with your money right now is put it into a bond mutual fund. If you need income and you want to invest in municipal bonds, for instance, buy individual bonds. But, stay away from bond mutual funds.”

Watch the video above to hear it directly from Suze!

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