3 min read.Updated: 01 Aug 2022, 06:25 PM ISTANDY KESSLER, The Wall Street Journal
As the crypto crash showed, guarantees of high returns are never really certain.
Before the 2008 financial crisis, one of my neighbors took out a home-equity loan from Wachovia, paying around 5%. Wachovia never sent an appraiser to the house, but that isn’t the weirdest part of the story. My neighbor asked his financial adviser what to do with the money left after he’d paid some expenses. The adviser suggested a money manager who guaranteed 12% returns, explaining “you’re borrowing at 5% and getting paid 12%—you’d be stupid not to do this."