The Big Money v. Suze Orman

Over on The Big Money, James Scurlock has written a rather scathing piece on Suze Orman. To judge from the comments, though, it appears most of the readers don't quite agree with his perspective, or at least, with how he's chosen to express himself. So, here's a quick guide on how NOT to write a piece critical of a financial adviser (celebrity or not):

1) Start the article with a snippy personal comment: The opening line of the article describes Suze Orman as 'a bottle-blond former waitress and self-described "55-year-old virgin" with a taste for the good life'. Multiple problems here:

-Making reference to her as a bottle-blond seems pointlessly snide at best, and sexist at worst. Not exactly the way to endear yourself to her fans and change their minds (as is arguably at least one of the goals for this article).
-Calling her a 'former waitress,' as if her previous work experience mattered at this point in her life, comes off as insulting to anyone who started out in a low-paying job (I certainly wouldn't appreciate someone feeling that the best way to address me once I've established myself in a solid career was as a 'former McDonald's grill worker.')
-The '55-year-old virgin' comment (a reference to Ms. Orman's sexuality) is irrelevant (as is any other detail of her sexual history) and frankly, comes off as homophobic.

If this isn't starting out on the wrong foot with anyone who likes Suze Orman, I don't know what is; add in a few more personal insults, like 'cougar', thrown out during the course of the article, and you've pretty well alienated a large part of your perspective audience.

2) Misunderstand a common piece of investment advice, and make it your main attack. Mr. Scurlock presses his primary case against Suze Orman as opposition to 'dollar cost averaging' (or DCA). DCA is process where you regularly purchase new shares of a stock or mutual fund on a regular basis, spending the same amount of money with each purchase. In this way, you buy more shares when prices are low and fewer when prices are high, decreasing the average amount of money you spend per share. To which Mr. Scurlock asks,

Since when does throwing good money after bad make you rich?

The answer is, when you're investing in mutual funds (particularly, as Ms. Orman and many others suggest, in index funds). Yes, for individual stocks, DCA is a dangerous proposition; companies can and do go bankrupt, taking the stock price down to zero. BUT, if you invest in funds that hold hundreds, if not thousands of individual stocks, the chance of enough of them going bankrupt (or losing nearly all their value) to make your investment worthless is shockingly slim. Furthermore, if you follow the advice Ms. Orman lays out in her books, like Young, Fabulous, and Broke, you'll be investing in a fund that owns essentially all the available US stocks, and another fund that holds stock from all the countries in the world. Short of a massive, world-wide economic collapse of unprecedented proportions, there's virtually no way that such a portfolio will lose money over the long term. (You might, of course, believe we're in the first stages of just such a collapse right now, but that's an issue beyond the scope of this blog entry.)

3) Accuse the guru of hypocrisy. Besides the comment on DCA, Mr. Scurlock also makes a few remarks on Ms. Orman's spending and investing, which seem to contradict her philosophy as expressed in her books and other media. He notes that she spends up to half a million dollars on private jets, sells 'Cruise with Suze' cruises, and has the vast bulk of her money (roughly $32 million) in government bounds, rather than stock market as she recommends for most people.

I think the best to answer these concerns is to paraphrase Ernest Hemingway, 'The rich are different from you and me; they have more money.' Given Ms. Orman's multi-million dollar fortune and the sizable income she can expect this year, she can certainly afford to spend a few million on whatever indulgences strike her fancy. As for her investments, she is simply doing what most people who find themselves holding such a fortune tend to do: focusing on preserving, rather than growing, their wealth.

Overall, I don't think Mr Scurlock's piece did much justice, either to him or to his case against Suze Orman. A more nuanced view of Ms. Orman (and one more aligned with my own feelings) was written by Trent of The Simple Dollar. I recommend it as a good example of how to write about financial gurus.