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Subject:  'Buckets of Money' guy charged with fraud by SEC Date:  9/8/2012  9:11 PM
Author:  intercst Number:  70899 of 75683

Many of you may remember syndicated radio host and financial advisor Ray Lucia who endlessly pedaled his "Buckets of Money" asset allocation strategy for retirees. Turns out he's a fraud and never backtested his methods as advertised -- kind of like another Motley Fool Foolish Four.

http://www.sec.gov/news/press/2012/2012-177.htm

Washington, D.C., Sept. 5, 2012 – The Securities and Exchange Commission today charged a nationally syndicated radio personality and financial advice author for spreading misleading information about his “Buckets of Money” strategy at a series of investment seminars that he and his company hosted for potential clients.

The SEC’s Division of Enforcement alleges that investment adviser Ray Lucia, Sr. claimed that the wealth management strategy he promoted at the seminars had been empirically “backtested” over actual bear market periods. Backtesting is the process of evaluating a strategy, theory, or model by applying it to historical data and calculating how it would have performed had it actually been used in a prior time period.

According to the SEC’s order, the two cursory spreadsheets that Lucia claims were backtests used a hypothetical 3 percent inflation rate even though this was lower than actual historical rates. Lucia admittedly knew that using the lower hypothetical inflation rate would make the results look more favorable for the Buckets of Money strategy. These alleged backtests also failed to account for the negative effect that the deduction of advisory fees would have had on the backtesting of their investment strategy, and their “backtesting” did not even allocate in the manner called for by Lucia’s Buckets of Money strategy. The slideshow presentation that Lucia and RJL used during the seminars failed to disclose the flaws in their alleged backtests and was materially misleading.

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intercst
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