I have seen Pamela Yellen’s books before, but never really paid attention to them until I read this piece by Allan Roth.
Yellen is known for her “Bank on Yourself” books, a strategy that utilizes whole life insurance (UGH!).
Yellen is very outspoken when it comes to traditional financial advisors (on that we can agree). Perusing her blog, I found mentions of how misleading Wall Street is and such. Okay, fine.
Ms. Yellen is also misleading. Take a look at the following graphic she posted on her website to see why (click on the graphic to see a larger version):
Do you notice anything interesting in that graphic?
She left out dividends!
Is this an oversight or was it done to make her strategy look better? Either way, it doesn’t make her look good. If it was an oversight, it makes her look amateur. If it was done to make her strategy look better, it makes her look dishonest. She looks no better than the Beardstown Ladies did when they calculated their returns INCLUDING their contributions.
Regardless, there is NO REASON for this.
How big of a difference does leaving out dividends make? A lot.
I did some research and found that the S&P 500 Total Return Index closed at 2107.28 on March 24, 2000. The same index closed at 3127.87 on February 3, 2014. There are 5064 days (13.8644 years) between the two dates. If we divide 3127.87 by 2107.28, we get 1.4843. If we raise 1.4843 to 1/13.8644 and subtract 1, we get .0289 or 2.89% as the annualized rate of return between the two dates. No, it’s not good, but it’s a lot better than the .95% return that Yellen states in her chart.
I mentioned this in a couple of comments on her blog, but my comments went to moderation and I’m pretty sure they will end up in the trash. She is not interested in having a discussion. She is not interested in people who disagree with her. All of the comments I read were very positive about her strategy, which I find unbelievable and yes…dishonest. I pray her followers are more sophisticated than they appear.
DISCLAIMER: I have not read any of Yellen’s books. I do not want to spend money on them.