2715: You Don’t Have To Keep Up With The Joneses When It Comes To Investing by Kevin Ha of Financial Panther

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[00:01:09] This is Optimal Finance Daily, Episode 2715. You don't have to keep up with the Joneses when

[00:01:15] it comes to investing by Kevin Ha of FinancialPanther.com. And I'm your host and personal finance

[00:01:21] enthusiast, Diania Merriam. Now let's get to today's post as we optimize your life.

[00:01:31] You don't have to keep up with the Joneses when it comes to investing by Kevin Ha of FinancialPanther.com.

[00:01:39] My brother has a knack for making and saving money. At just 28 years old,

[00:01:43] he's managed to build up a sizable net worth. With his current pace, I suspect he can probably

[00:01:49] be financially independent by his mid-30s. What makes his net worth growth really astounding

[00:01:56] is that it pretty much happened by accident. While he's always been good at making and saving money,

[00:02:01] my brother has never been so good at actually knowing what to do with that money.

[00:02:06] For a long time, he put his money in a regular savings account.

[00:02:10] When he finally did start investing, his strategy was to walk into a random financial

[00:02:16] institution, give his money to some financial guy, and ask him to invest it for him.

[00:02:22] As you can probably guess, that money didn't end up in the best spots. The financial guy invested

[00:02:28] his money into expensive, actively traded mutual funds, which really didn't make much sense.

[00:02:34] Over the past few years, I've worked on educating my brother about the fundamentals

[00:02:38] of investing. Buy and hold, time in the market, keep costs low. These are all investing

[00:02:45] fundamentals that will get him to where he needs to be. He's now put his investments in a much

[00:02:50] better place than they were a few years ago. But every once in a while, my brother will ask me

[00:02:56] a question about some hot new stock or the latest cryptocurrency, or about some other weird investment

[00:03:02] that he heard about from a friend. I think there's a reason that these types of out-of-the-ordinary

[00:03:07] investments appeal to him. My brother actually has a lot of people around him that have hit it big

[00:03:13] investing in ways I don't recommend. I like to think of it as fancy investing. Basically,

[00:03:20] investing in stuff that's out of the mainstream or investing in extremely risky ways.

[00:03:25] One friend of his turned a few hundred thousand dollars into over a million dollars by putting

[00:03:31] it all into Facebook stock many years ago. Another friend of his is sitting pretty on a

[00:03:36] million dollar house that his mom gave him and is now living off the money he made from

[00:03:41] investing in individual stocks. He has other friends with big positions and cryptocurrencies

[00:03:47] as well. Every time my brother brings up some new hot stock or a new weird investment vehicle,

[00:03:54] I remind him that investing doesn't have to be fancy. There's a temptation to keep up with

[00:03:59] the Joneses in many aspects of our lives. And when it comes to investing, there's a

[00:04:04] temptation to keep up with the Joneses there as well. But as I keep telling him,

[00:04:09] the great thing about investing is that you don't have to keep up with the Joneses.

[00:04:14] You can ignore the people around you and go at your own pace instead.

[00:04:19] When it comes to investing, ignore the Joneses. It's hard to avoid the appeal of fancy investing

[00:04:26] when you're surrounded by so many investing success stories. Do any Google search and you'll

[00:04:32] find hundreds of articles about people that have made a big investing in the latest meme stock

[00:04:38] or cryptocurrency. Some people have become millionaires overnight by investing in something weird.

[00:04:44] That's not to say that betting it all on one thing is inherently wrong.

[00:04:49] Most people who make it really big have done so by betting big on one thing.

[00:04:54] Starting a business, getting an education, these are all big bets you're making on yourself.

[00:05:00] But these bets are a little bit different. You have more control over them compared

[00:05:05] to betting on a random stock or cryptocurrency. I often remind people that a lot of the success

[00:05:11] stories they see come from people in a completely different financial position than they might be.

[00:05:17] For example, my brother's friend who made over a million dollars investing in Facebook stock

[00:05:22] is living a very comfortable life now. But when you dig deeper, it turns out he didn't have

[00:05:27] anything to worry about at all. His incredibly wealthy parents gave him the money to do

[00:05:33] whatever he wanted with. We know about his success, but if he had failed, it wouldn't have even mattered

[00:05:39] to him. When you see success like this, investing in passively managed index funds seems so boring.

[00:05:47] Not everyone has to earn the money they invested though. When it's your money,

[00:05:51] you need to make sure you invest it correctly. Stick to the fundamentals. It'll get you

[00:05:57] where you need to go. My brother is already leagues ahead of most people his age. Keeping

[00:06:03] his investments boring will be enough for him to get to the promised land. He doesn't need a 10x

[00:06:09] stock or a big return on a cryptocurrency to make it. That's why I've been pushing him to stick

[00:06:14] to the fundamentals. Keep things low cost, invest consistently and do it for the long term.

[00:06:22] Putting all of his money into a total stock market index fund, for example,

[00:06:26] should be enough to get him to where he wants to be. Investing in crazy things looks cool.

[00:06:32] It's easy to see people making tons of money from some weird investment and feel like you're

[00:06:36] missing out or are stupid for not doing it too. But don't let that knock you off your path.

[00:06:42] Stick to the fundamentals and let that money grow. You don't need to keep up with the Joneses.

[00:06:47] Let them invest in whatever crazy way they want. You and I can stick to our boring old

[00:06:53] fundamentals. You just listened to the post titled,

[00:07:00] You Don't Have to Keep Up with the Joneses When It Comes to Investing by Kevin Ha of

[00:07:05] FinancialPanther.com and I'll be right back with my commentary. Looking to part ways with

[00:07:11] complicated, expensive and uncertain shipping? Then give your business the edge it needs

[00:07:16] with USPS Ground Advantage Shipping from the United States Postal Service.

[00:07:22] Keep everything simple with clear upfront pricing and no unexpected surcharges.

[00:07:28] Keep things affordable with some of the lowest prices out there. And keep it all reliable

[00:07:33] with on-time ground shipments. It's time to turn shipping to your advantage.

[00:07:39] Learn how at USPS.com slash Advantage. USPS Ground Advantage Simple, Affordable, Reliable.

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[00:08:59] This article reminds me of why I'm such a lazy investor. The goal of investing is not

[00:09:04] to beat the market. It's to reach a financial goal over time. And I can do that by matching

[00:09:10] the market. But even if my goal was to beat the market, the data shows that it's nearly impossible

[00:09:16] to consistently do that over the long term. The New York Times came out with an article

[00:09:21] recently discussing this. Out of 2,132 mutual funds designed to beat the market,

[00:09:28] not one actively managed stock or bond fund outperformed the market convincingly and

[00:09:34] regularly over the last five years. And the odds are even worse over longer periods of time.

[00:09:40] The article went on to say, quote,

[00:09:43] the studies have found that most actively managed mutual funds do worse than their

[00:09:47] benchmark index. Both over the long run and the vast majority of calendar years in the United States

[00:09:53] and elsewhere around the globe. For example, the last time the average active U.S. stock fund

[00:09:59] beat the S&P 500 stock index for a full calendar year was in 2009. And over a full 20-year

[00:10:06] period ending last December, fewer than 10% of active U.S. stock funds managed to beat their

[00:10:12] benchmarks. End quote. When you consider the higher expense ratios of actively managed funds or the

[00:10:19] amount of time and effort I could spend myself stockpicking, the juice just isn't worth the

[00:10:25] squeeze in my opinion. And that'll do it for another edition of Optimal Finance Daily.

[00:10:30] Thank you for listening. And I'll be back tomorrow as usual. So I'll see you there

[00:10:34] where your Optimal Life awaits.