Suze Orman is thinking what is best for her audience

I'm taking Moose's approach in responding to Dominic's posts titled in "What does Suze Orman really think?" (i.e. making this as a separate post rather than comments to the article, since it's quite a long response)

Q: So What does Suze Orman really think?

A: I think Suze Orman is thinking what is best for her audience.

Suze Orman is a very smart lady. She gives investment advice tailored to her audience. Though I don't agree with everything that she advises (nor that I am a fan of her), but I think her advices are quite solid (diversification, asset allocation, pay credit card debt, take some risk and investing in stocks,take free money i.e. 401K matching etc, etc)

She is not about "not doing what she preach". She is about common sense (and she expect her audience to have one too). And this is one of the few cases where you don't want to do exactly what she does for herself. Everyone has different optimal solution in terms of how an individual should manage their money. Suze know how much money she needs. she know herself and know what she know and know what she doesn't know. She has more than $30M in net worth. unlike many of her audience (that comes to her show such as YFB/young, fabulous and broke, or those who read her book) that probably has less than $100,000 in investable asset (or even net worth). You can't get much with putting all $100,000 in bonds (which probably earn 5-6% which translate to $5,000-$6,000 per year). I saw her show on PBS and many of those who come to the Suze's women and money workshop were middle class and lower class (at least those who were highlighted or being profiled on the show is)

In contrast, Suze, with $30M+, and knowing that she doesn't use that much money, she decided to be more conservative (and I don't think anything wrong with that). If you think this way, with $25M in zero coupon bonds which probably will yield 6%, that's like $1.5M income per year, which I believe she will still have to pay tax on that, so she probably netted about $1M per year after tax (give and take). And I think $1M is a lot of money, even for Suze (I'm guessing). Most likely she will re-invest most of that money (whenever the bond matures) either to add more real estate, bonds or some stocks I don't know, but I hope you get my point. And I think I don't need to mention the $7M in houses and $1M in stocks that she also have which values can also go up (or maybe down, which Suze mentioned she doesn't care if her stocks goes to $0. This tells me that she either don't feel confident in stock picking or she just doesn't want to deal with stocks which she obviously can afford to do so).

Maybe people say that she is lucky to have accumulate that much wealth, and maybe they are right, but the fact of the matter is that she is smart enough to stay up there.

I'm also not saying what Chuck Jaffe of MarketWatch is wrong (cause that is what Suze really do to her portfolio), but I think Chuck is not looking at the big/complete picture.

In the end, I think it boils down to some key things that you need to know:

1. Who you are (risk tolerance, patience level etc)

2. What your goal is (how much you willing to have, how much you want to spend, timeline for investment)

3. What you know (if you are good at picking stocks, or bonds/interest rate prediction, or any particular industry, or profession etc)

4. What you don't know (i.e. the impact of keepping up with the Joneses, credit card interest accumulation, time value of money, the beauty of long term compounding, rule of 72, cost to own/rent, oil or metal price prediction, or interest rate prediction, picking stock, or bonds, or real estate, or budgeting, or money management etc)

But bottom line is, it's all about common sense...

Happy Investing!

Sidarta Tanu