5 Investments That Are a Complete Waste of Money

About this video

• Video Title: 5 Investments That Are a Complete Waste of Money
• Channel: I Will Teach You To Be Rich
• Speakers: Ramit Sethi
• Duration: 16:22

Overview

This video identifies five common investment pitfalls that can lead to financial loss. Ramit Sethi explains why certain investment strategies and financial products are often scams or simply ineffective, emphasizing the importance of a time-tested, diversified approach to building wealth.

Key takeaways

• Red Flag #1: Control: The desire for control over investments (timing the market, selling high, buying low) often leads to losses. Professional investors struggle to consistently beat the market, suggesting that less control and a consistent investment strategy is more effective.
• Red Flag #2: Lifestyle Porn: Investments driven by aspirational marketing and the desire for a luxurious lifestyle (e.g., timeshares, expensive cars, large homes) can lead to decades of financial strain if not carefully considered for affordability and true importance.
• Red Flag #3: AUM Fees: Paying a percentage of assets under management (AUM) to financial advisors can significantly erode returns over time. While professional advice can be valuable, flat fees are often a more cost-effective alternative.
• Red Flag #4: Unrealistic Returns: Promises of consistently high returns (e.g., 20% or more annually) are often a sign of scams or Ponzi schemes. The historical average market return is around 10%, and consistently beating this is extremely difficult.
• Red Flag #5: The Next Big Thing: Chasing hyped investments like NFTs or meme stocks, especially when widely discussed, is usually too late. These "next big things" often experience dramatic collapses due to survivorship bias, where only successful investments are remembered, masking the numerous failures.
• Time-Tested Path: The recommended strategy for building wealth involves diversification across asset classes (stocks, bonds), market capitalization (large, mid, small), and geographies, often through low-cost index funds or target-date funds.