Chapters
Shownotes Transcript
- I say it all the time. Dan and Shay are this generation's rascal flats, but that's neither here nor there, and I'm not making a whole video about it. Don't worry.
- Oh, thank God. - Today's video is about another phrase you've probably heard me say a lot. If you fall for the trends, you'll fall for the traps, especially when it comes to investing. And let me tell you, there's plenty of investment traps out there. You can find them pretty much anywhere. Instagram, TikTok, YouTube, cable news, TV commercials, and even text messages from that guy you sort of knew in college who suddenly wants to meet up for coffee because a friend said you'd be, quote, "a good person to connect with."
We all know what that means. First it's coffee, next it's LinkedIn, next thing you know you're hooked in an MLM for the rest of your life. I ain't falling for that again. So today we'll go over some common investing traps and I'll reveal why they suck so you can avoid them like the plague and focus on investing the right way. But before we jump in, like, subscribe, and share this video with all the Rascal Flatts fans in your life, because life is a highway and they are going the wrong direction.
Okay, here we go. The first investing trap on our list is a bit controversial. Amateur finance bros are still pushing this all over social media, despite the fact that so many people have lost a butt-ton of money on it. And that is cryptocurrency. Now, if you ask me, cryptocurrency is just Mary Kay for young men. And here's what I mean. The people who are into crypto are obsessed, much like the people who are into multi-level marketing schemes. And if you're not on board, you...
Just don't get it. On top of that, the product and profit are both hype driven. Crypto involves high hopes of making big bucks, and it's more about recruiting and sales than the value of the actual product. Think about it. If nobody believed crypto would be a thing in five years, nobody would buy it. Everyone would sell it and it would end up being worth nothing. So of course, crypto bros want you to think it's going to take off. And I know at this point you probably think I have a tattoo on my lower back that says crypto sucks, but I'm actually not anti crypto.
Free? He will never be free.
All right, the next investing trap on our list is so ridiculous. It reminds me of that thing where you can pay actual money to name a star or like name a rat after your ex, aka not a smart move, but pretty funny. It's not funny. I'm talking about NFTs, non-fungible tokens, and don't you dare try to fung them.
No funging. No touchy. No touchy. When you buy an NFT, you get a unique digital token that represents a unique digital asset, like a painting of a frog smoking a cigar on a tightrope. But here's the deal. NFTs are more of a useless flex of, quote, ownership than an actual investment. Yeah, maybe you get bragging rights, that digital painting, but the only chance you have of making money on an NFT is if another sucker comes along who's willing to pay more than you did for that digital cigar-smoking amphibian.
So don't waste your money on NFTs unless you just enjoy wasting money. Just because you want it.
doesn't mean it can happen. Okay, the next investing trap may come as a surprise to you because a lot of people who do this think they're being smart and responsible with their money. And some even believe it's the best way to pass on generational wealth thanks to phony financial gurus on social media. What I'm talking about here is permanent life insurance. The types you may have heard about are universal life, indexed universal life, variable universal life, and whole life. Not to be confused with whole grain life, which is delicious. And cinnamon life, even better, S tier. F
Chef's kiss. All of these insurance types have a cash value portion, which is what insurance agents promote as the great investment. They pitch some incredible benefits like risk-free growth, tax-free inheritance, and infinite banking. But permanent life insurance as a wealth-building tool is just a legal scam peddled by insurance agents posing insurances.
It's a scam.
This will not stand. Permanent life insurance is a really crappy financial product. So avoid it like you avoid the guy at Home Depot who totally went to your high school, but you have no idea who he is. You just go, hey, buddy, nice paintbrush you got there. Who are you looking at?
So should you have life insurance? Sure, but you should get one kind and one kind only, term life insurance. Because remember, the only purpose of life insurance is to replace your income if you die. And term life insurance is a fraction of the cost and keeps your insurance separate from your wealth building the way it should be. Okay, the next investment trap is one that's pretty easy to fall into thanks to tons of smartphone apps out there like Robinhood. And that trap is investing in single stock.
That would be cool.
But here's the deal. Single stocks can be super volatile. And a lot of people who buy them are just trying to time the market, buying stocks right before they think share prices are about to go up. That is a bad plan. And don't get me wrong. I'm a huge fan of the stock market. But there's a much better way to invest in stocks. And that's with something called mutual funds. With mutual funds, a group of investors, like you, pool their money together to buy stocks from 90 to 200 companies individually.
chosen by a professional fund manager. They're way more diverse and way less risky than betting everything on one company like Twitter. Elon knows what I'm talking about. You know what? That actually happened. Of course it happened. Think of it like this. Single stocks are like betting all of your money on a single racehorse. Mutual funds let you own the racetrack. Giddy up.
That's my best Kramer. I know it's not great, but it's a start. I think the cadence was there and the little pop at the end was nice. Giddy up. Before we get to the next investing trap, there's another trap that's keeping you broke. And that's paying astronomical prices for your cell phone plan. It's 2024, people. We got options out there. And one of the best options is Tello. They're a mobile service provider designed to save you money. And they're a sponsor of today's episode. And they're sticking it to big wireless with flexible, affordable phone plans with a
with the same reliable coverage and features as the big guys. In fact, they run on T-Mobile's network, so you're guaranteed some sweet, sweet high-speed data. So how affordable, you ask? Well, their plans start at just five bucks a month and go up to 25 bucks a month for their unlimited everything plan, which is a freaking sweet deal. Not only do you get high-speed data, but it also includes a hotspot. And here's the cool part, no contract, and you're free to upgrade and downgrade anytime you want. They're that flexible.
So go to tello.com/george or click the link in the description and sign up to get $5 off Telo's unlimited data plan for the first month of service. That's tello.com/george. You can tell them I sent you, but they'll know 'cause you used the link. So I guess you don't have to tell them. All right, back to the list. Much like the last investing trap, the next one on the list has become popular in recent years because of investing apps. And that trap is micro-investing.
Not to be confused with micro-investing, which is where you own the entire collection of dirty jobs on DVD and hope it goes up in value over time, which it will. The micro-investing I'm talking about is a strategy that allows people to invest tiny amounts of money through mobile apps like Acorn, Stash, and Robinhood.
Now, many of these apps will automatically round up your purchases and invest spare change or make automatic transfers to investments. And listen, I'm all for investing, but not like this. Investing spare change is like picking up spare change. It's not a bad habit, but you'll never build wealth doing it. So remember this, micro-investing leads to micro-results. Put that on a shirt and sell it on Etsy. So what do you do instead?
Invest 15% of your income into a tax-advantaged retirement account because that will do way more than investing 15 cents every time you buy a cheesy beef gordita crunch supreme. All right, next investing trap is not necessarily a bad thing. It just doesn't have a very good ROI and there's better places to put your money. The name? Bonds. Government bonds.
Now, bonds are loans that corporations or governments sell to investors. Think of these as IOUs on a set schedule. So investors, like you, buy bonds and get their money back, plus some interest. Since they're often backed by governments and guarantee a steady return, bonds are seen as a safe investment and attract people who get spooked by market volatility. Sorry, it's just you. I thought you were market volatility. Apologies.
Why would you think that? Anyway, investing in bonds is like trying to run a marathon by crawling. Sure, you're not going to trip and fall, but moving that slow will hurt your chances of ever finishing. You probably won't even make it to the first station where they give you water in a tiny cup and strawberry flavored goo. Now, the goal of investing is to grow your money, not just to keep up with inflation. So stick to mutual funds and index funds and invest for the long haul. Your future self will thank you when you cross that finish line of retirement and collapse from having so much money.
Okay, the metaphor breaks down a little bit with this marathon stuff, but you get what I'm saying. Don't tie up too much of your money in bonds. No, no, I'm not doing it. I'm not doing the joke again. Fine. Government bonds. I think that was going to be, it's going to be flat. It's going to be flat. And everyone, all right, it's your choice, editors. It's your funeral. I'm willing to take that risk.
Okay, this next one is very popular right now, thanks in part to a ruling from the Supreme Court that lets states call the shots on this very specific type of gambling. What I'm talking about is sports betting. Take the already addictive nature of gambling, combine it with the ease of mobile apps, add in some peer pressure from your sports-loving friends,
Throw in the odds stacked against you by a professional bookie, and that is a recipe for disaster. Look, your odds of making serious money through sports betting is seriously low. And if you ask me, sports betting is just socially acceptable gambling disguised as entertainment. It's not fandom, it's financially dumb. So stay away from sports betting and all the apps that go along with it.
just enjoy the freaking game with the boys. Okay, it's time for the last investing trap on the list, and this is something you can find all over TV these days, and that is precious metals. Not to be confused with Precious Moments porcelain figurines, which I would also consider a bad investment.
and creepy. Precious metals are the rare and valuable metals like gold, silver, and platinum that investors buy as a hedge against inflation and currency devaluation. And you've probably heard people on social media or TV saying stuff like, you gotta buy gold, it's gonna save you during the economic collapse, it's all coming down. But truthfully, that advice is like a Zac Brown band song. Sounds great at first, but when you really look
at the details, it doesn't make much sense. So let's say you bought a thousand bucks worth of gold in the year 1989. Well, that thousand bucks would have bought 2.6 ounces of gold back then and would now be worth $5,000. Not too shabby. Now let's say you invested the same $1,000 into the S&P 500 that same year. You would have gotten about 3.5 shares for your money. And today, those shares would be worth over $15,000. That is three times the return of gold. So the stock market is a much better investment. You
You don't need a hedge against inflation because what are you going to do with all that gold when it all comes crashing down? You're going to need to barter for food, fuel, and ammo, okay? Nobody wants your gold. And besides, the precious metals industry is rife with scams and fraud. So TLDR, precious metals are fear-based investments with poor returns sold by opportunistic fear mongers. There, I said it, and it feels good.
to say mongers. Not every day you get to do that. When you look at these bad investments we've talked about, they all have something in common. And I call these the three stooges of wealth building. Greed, fear, and pride. Greed can lead people to make some really dumb decisions. And just think about how many get-rich-quick schemes and stupid investments are based on fear, either of the economy crashing or the FOMO of missing out on crazy profits. And the prideful investors tend to be the ones who get their butts handed to them.
They'll time the market because they think they can predict the future, or they'll place a risky bet because they think they're smarter than the bookies. Or they'll put all their money into crypto instead of retirement because they, quote, understand the blockchain technology. But trust me, the humble investor will beat the prideful investor in the end. This is tortoise versus hare, so choose your character wisely. P.S., if I'm you, pick the tortoise. The tortoise ends up winning. I like turtles.
All you need to build wealth like a humble turtle is a tax advantage retirement account, like your company 401k and a Roth IRA. And you can sprinkle in some index funds and paid for real estate in there if you'd like. That tried and true boring stuff is what's going to win in the end and give you the most peace along the way. And don't get distracted by all the shiny things out there, because if you fall for the trends, you'll fall for the traps. And speaking of traps, do you know about America's number one wealth killer? Well, check out this video to make sure it's not keeping you broke. Thanks for watching. We'll see you next time.
