Even if they are wrong and you will end up with 500k instead of a million, it is still better than not investing. Sometimes, the journey toward is better than destination.
Yes, the habit and the financial resources to get to $100,000 are key. The future is not guaranteed in the way that many UA-cam videos would have people believe.
Not wrong, but the clickbait titles indicates something magical happens at that arbitrary point. It's almost like they're reverse engineering content from the YT algorithm.
That's because our government printed off a ton of money and inflated everything over the last few years. If you look at what the money will actually buy (ie how many months of rent and groceries are your investments worth) it's barely changed.
I think this video is a bit overly pedantic. None of the UA-camrs you shared are claiming the market will go up 10%/yr, every year. It is clear, especially in context of their other videos, that they are referring to the historical average. Someone with $100k invested is obviously going to grow in bigger increments than someone with $1k or $10k. Of all the financial advice to criticize on the internet, this was not a strong pick. Meanwhile you've got Dave Ramsey giving actually dangerous advice like saying that retirees can pull out 8-12%/yr from their investments and never run out of money.
No, but his point was that the historical average is not a guaranteed return. Someone could conceivably invest consistently for 30-40 years and see their portfolio mostly rise in value over all that time, but then a couple years before they retire something catastrophic happens, the stock market crashes, and their investments shrink in two years to the point that all their investments now only provided an average 5% return over their lifetime. Now what? Do they wait to retire, hoping things course correct sooner rather than later? But what if they don't correct soon? What if it takes another 10 years to get back to their highest high? Surely, given enough time, their portfolio will rise again, reaching the 7-10% average return, but how long will that take? This is why I'm planning two separate retirement accounts. One safe, low-return portfolio to immediately live off of when I retire, and another to continue to grow if the market is struggling when I retire. For a time, I'll be able to withdraw from my safe account, waiting for the right opportunity to shift my riskier account to safer investments to live off of later if need be.
I tend to agree. There's good info in here - and it is *absolutely* important to make it clear to people that investing isn't just a higher percentage savings account. I've never thought that myself, but I guess some people could. Yes, things go up and down: I started investing seriously in May 2017 and I see lots of jaggedness and volatility, and my returns did go negative (barely) around December 2018 and March 2020, and 2022 went down overall. But overall, I'm made out pretty well in the past 7 years, basically just doing SP500 and total stock market index funds, continuing to buy regularly, and basically only selling because I needed cash out for a couple of larger purchases. ...Granted, people's strategies are different, asset allocation is important (and I'm admittedly stock heavy), not financial advice, etc., etc. Fair point that people shouldn't be overly positive about investments to the point of being misleading; totally fair! And people should be careful about investing and not just follow everything influencers say; also totally fair! But I think this comes across as a little too negative; even shows which may underplay the impact of volatility may have a lot of good advice because they are trying to encourage people to invest. Of course, that's just my take, and I'm sure many will disagree.
I think Ramsey has some decent advice for people getting out of debt, but it's clear he has no clue how the market works long term. A lot of his assets are tied up in real estate anyways. 4% makes the most sense for most people, but most people living off of their investments alone should be prepared to live on less than that depending on how young they retired. 3% is a much safer number to plan on in "worst case" scenarios if the market is down and you don't have liquidity or a side gig to fall back on.
The problem with promoting 'averages' is people can assume the market is a guaranteed annuity. They're not prepared for a crash that takes 6-10 years to recover.
Took 33 working years to hit $100k. Took 4 working years to hit $200k. Less than 1 working year later I am approaching $250k. Closer to an explosion than a crawl.
Yeah i feel that. I get he is saying to be a little more cautious, but most people will agree that their personal experiance is it only starts growing quicker and quicker.
You are correct but this video risks demotivating people in investing. The best thing to do is to invest consistently for a long period and dont stop, no matter what happens. In many years time you will thank yourself, if you are able to wait out the down periods
I understand your point. What I disagree with is how many people portray the stock market as a magical money-making machine. The problem is that half knowledge is worse than no knowledge at all. If an individual does not know about risk management, the quality of assets, or the concept of panic selling, they could potentially end up hurting their financial lives. It particularly bothers me because I’ve met people on both ends of the financial literacy spectrum. The knowledgeable will survive one way or another, but what about the rest? The content is primarily targeted for those. While I really appreciate the efforts these finfluencers are putting in, I would love to see them include more details, risks, and a clear representation of both the worst and best-case scenarios.
If people don't that knowledge for selecting specific investments, there are plenty of indexed options that will help mitigate risk over time. People need to know the stock market isn't likely to pay out like a slot machine. Consistent investment and time is what will give most people significant returns.
@@2696yogesh nothing is 100% guaranteed in the stock market, only more or less probable. You got the cycles as well, a lot to take into account. Might as well be a crash just as you got ready to reap your rewards over the years in the latter stage of your life. As some say, if I knew I would fall, I wouldn't get up on the first place. :) What I agree with, better to do with the best of your knowledge, than refrain from action at all, as the inflation will take it's toll.
With how hot the market has been this year, this video is a welcome reality check. I think the exciting thing that all of these content creators are trying to communicate to beginner investors is that once the average person reaches 100,000 dollars invested, they start to see growth in their portfolio that exceeds what they are able to save with their income. This is hugely exciting for a new investor because it finally feels like their assets are working harder for them than they are at their job. The part these creators don't mention is that with the upside there comes a downside. With 6 figures or more invested in the stock market there will be months and even years where investment losses also exceed earned income and investors need to be mentally prepared for that possibility. Thank you for the video Evan.
During bear markets, your portfolio total will continue to decrease regardless of how much you add & invest. You just have to keep steadily investing anyway. And bear markets are actually a blessing as they’re an opportunity to buy when the prices are low. It’s even been said that you should pray for bear markets here & there.
Agree with this 100%. In early years it’s about building the discipline to save. In later years it’s about building the mental discipline to stay the course. In down years I often see posts from new investors saying “why am I investing? I keep adding X every month and my account balance keeps going down.”
You completely missed the point of those videos. It is a mathematical fact that the more you have the more it growths. It may not happen every year but it happens on average.. for 70 years if you play safe like with the s&p 500
You pointed out the first 10 years of his investing he lost money 2000-2010. Which is incorrect, you would be assuming he lump sum bought at the start and didn’t DCA. Which is extremely unlikely. And actually the best case scenario someone staring would want. To buy and build a strong foundation during downturns at low prices.
i agree. i have been tracking my networth since 2004 with continuous investing without major moves in or out of the market. steady increase from 2004-2008 and then GFC hits. recovers pre gfc peak in 6/08 by 3/2010 and by 2012 or so resumes the upward trajectory being charted from 2004-2008 and not from a new lower baseline established by the global financial crisis. so i didn't "lose" money in 2000-2010 as i didn't sell.
Agree. The main thing the fin-influencers are doing is to incentivize people to invest and save, and to develop a discipline of saving, and that's a good thing.
While you make some fair points, I think these fincluencers are not necessarily bad. They give solid advice on reducing debt, on avoiding fees and on financial discipline
I went to uni with Nischa, one of the finance YTers mentioned, and her channel is a complete hoax. She has bought all her subscribers and views. If you look up channel analytics for her channel you can quickly see her numbers are fake 😂
Being a little harsh on Ramit here, his information is a little generic and simplistic, but he is pointing people in the right direction. If you are going to criticize youtube "financial exerts", there are many other people out there giving really terrible advice you could go after.
Honestly, fair enough. There's plenty of bad info out there and I love lots of what Ramit says about living your own rich life, managing investing costs and that home ownership isn't a requirement for financial success. But my gripe is about his investing content and since he has such a large platform, he should know better. Plus, since he's not scared of throwing rocks in the direction of financial planners indiscriminately, I think he can handle a couple jabs back his way :)
Follow up here…. From what you see, who are the others giving really terrible advice? Don’t name them publicly please but shoot me an email at hello@evanneufeld.com. I’m curious about what else is out there.
Facts Ramit is good for the regular guy. It’s encouraging and points them on the right track. What this video does is discourage people from investing. Which is wrong. Nobody knows the exact outcomes but if you invest long term your future outcome is definitely better than those who don’t.
Also its weird to say that the stock market doesnt have "compounding". First there are dividends but even excluding that, if you have $100k and the stock market goes up 10% for rounded numbers you made $10k. If the next year the stock market goes up 10% you get more than $10k because you also earn off of your appreciated asset base. That is compounding.
To add on, Charlie Munger coined this originally in the 1990s. If there were a theoretical point where it explodes, it would be around $200k in today's money, not $100k
In my opinion the number is at the point where your investment is contributing and similar amount to yourself. If you can contribute 10k every year and your portfolio grows 10K that’s a huge milestone where your money is working just as hard as you are.
@@userofsharingan Yep, so it really just depends on your savings rate. Someone earning $80k and saving 15% would contribute $12k per year, so for them the amount would be about $120k. Someone earning $200k and saving 25% would be contributing $50k per year, so the point where their portfolio generates as much as they contribute would be around $500k.
Season's greetings, everyone! 🎄 The most important thing on everyone's mind right now should be investing in different sources of income that don't rely on the government, especially with the current economic crisis. As we enter 2025, I encourage everyone to start investing now to secure a more stable financial future.
We invested $500 a week for 3 and a half years and recently hit $100k. For most of that time the portfolio was underwater but we just kept plugging away. Worst point was around halfway through when we'd invested $50k and the portfolio was at $43600 (approx). It was in the black in the last few weeks overall however. We'll keep investing regardless.
$500*52*3.5=$91000 Like yeah that's good to hit $100k but your investing $26k per year. The investment returns haven't really had time to make an impact. You would have done nearly the same in a good cash savings account. A good memory aid is to think of two people: you invest $1000 per year into global stocks between 2025 and 2035 and then you stop Your friend starts investing in 2035 and invests $1000 a year into global stocks until 2065. In 2065 the average expected total value of your investment between you and your freind is the same.
@@kxjx At the end of the day we started with nothing and we invested "something" consistently. We've got it up to $100k and have gone from having no financial plan to building up a good nest egg. This is only part of our investments.
I like Ramit. He is a positive dude and I’m pretty sure he helps a lot of ppl in the course of his business,but this example? He was pulling it outta his ass. Details matter. Stocks don’t pay ‘interest’,but I notice a ton of people talking about compound ‘interest’ who don’t seem to know the difference between compound interest and compound growth. They’re not the same thing.
I generally like Ramit too honestly. His podcast talking to couples is really interesting! But he gave me some low hanging fruit here so I thought it would be worth picking away at. Thanks for your comment!
There was a big debate years ago about that... in the end, it doesn't freaking matter. Is there a difference between the two, of course... but you have to speak in terms people can actually understand. Otherwise, your videos will fall flat and those people won't see that content in the first place
I figured "interest" was a simplistic term to help people understand. But he has fallen into the trap he's warned high performers for years: The world wants you to be vanilla, and they will abandon you as soon as you are. He is getting more and more diluted on youtube, as he aims to cater to the general audience.
My investment wealth exploded when I got fired from my last job, then searched desperately for a new job, then foolishly cashed out much of my 401K while unemployed, then by sheer coincidence got a NYC job that paid three times what I was making before. I swear, it all feels entirely too much like luck than education, hard work, knowing people, location, etc...
On Reddit I recommend, as a crude method of adjusting for risk, that people run the long term numbers at 7-8% and then chop that number in half. Assume a range of outcomes ($1-2 Million) not a fixed number ($2.25 million)
Appreciate the perspective. I also find it obnoxious how everyone repeats the same thing, not just regarding your net worth "exploding" at $100k but personal finance content in general. It's all so repetitive. A lot of what you're saying seems to be arguing semantics i.e. referring to portfolio returns as interest or saying "net worth" instead of investment portfolio. You're not wrong, I just don't think it's the biggest deal. A lot of people find finance and the jargon intimidating so it makes sense that finfluencers are trying to dumb it down to reach more people. Regarding the 7% claim, the S&P 500 has averaged a 7.5% annual return over the last 100 years. Of course, past performance doesn't indicate future results and returns vary greatly year over year, but over a long period of time I think 7% is a fair expectation. This point is usually made in these types of videos, with the main message being to stay the course regardless of annual performance.
You're right that the semantics aren't the biggest deal but if you're going to teach people about money, you need to understand what the words mean. A stock portfolio doesn't pay interest. Understanding that matters. Finance language is intimidating for sure but it doesn't mean we need to use wrong language to make it accessible. I'm fine with discussing averages but my whole point is that the path to average isn't a straight line. It gives people the wrong idea of what should be expected.
agreed! But easier said than done for most people and if they expect it will always go up, they don't know what to do when it inevitably goes down again in the future.
@@canadianmoneyroadmap Also, the market may always recover, but we can't tell how long it will take. In the case of the Japanese stock market - 40 years. That's a long time to be in the red.
Someone did a scenario on the Nikkei index and found that if you dollar cost averaged into it, even during the Lost Decades, you would still come out ahead. A lesson to stay invested and be consistent over the long term.
1. What are the “portfolios” they actually use to run the simulator? 2. 833 per month regardless of the market situation? You realise the right strategy in doing that is DCA into a Strong support level of the price action strategy to approximately actualize the 10% annual gain right. 3. Do they even select the top ETF tracking S&p500 with the best expense ratio? You are making a highly conjectured video without much in-depth understanding of index fund. Basically painting it with a wide brush.
Pretty nitpicky TBH. Monte carlo is also not terribly accurate, since it doesn't account for actual stock market behavior. If it's down one (or more) years, it usually goes up the next year(s)! Monte carlo does not do this. You can have a -25% year, followed by 6 years of 0-8%. Not at all realistic. I'd preferred if you used historical data. And in any case $100k is just an arbitrary number to strive for. Also somewhere around there the returns might start to outpace the contributions for most people
Great stuff. People need to see this stuff. I became a millionaire (net worth) around 32-33 which sounds CRAZY when I type that out, but it’s mainly just tied up in the equity of my home, or in a retirement savings account (Live in Aus.) We still live no different to how we did in our 20s, conservatively and always saving/investing. We don’t splurge, I work part time which is nice, but it’s nothing like people would expect. Investment income/returns are still vastly smaller than salary/wages, and it still requires lots of discipline and patience to build wealth. There aren’t any shortcuts.
Smashed the like button within 20 seconds of the video! I watched Ramit's recent video about how it will take 20 more years to go from 100k to 1 million, which he says is 10x in only 3x the time it takes to get to 100k under the same assumptions. I get the point. I get that there's compounding. You should be investing in the stock market. I get that time works well in your favor the longer you let it cook. But it is still a slow process to 1 million (or whatever your goal is) unless you ramp up your contributions. Hardly an explosion. I don't want to wait 20 years if my goal is to watch my net worth explode. It's the same as going from 10k to 100k. Exponential curves are exponentials at all points of the curve.
Hello. I'm new here. The UA-cam algorithm brought me here. I consume A LOT of personal finance videos. I appreciate that you are a CFP. You are right about the math. It took many years of watching numbers to realize that the greatest wealth builder is your income and a standard of living dramatically below your income so you can save aggressively. I hear people say it over and over again, that your income is your greatest wealth builder, but you can't really feel that impact until you are out of debt and living well below your means and putting money to work in assets, whether those assets be CDs at your bank or ETF stocks or real estate. These things take years, and aiming for 100k has allowed me to put my money to work, and THAT is helping me feel like I am getting ahead when combined with my income. Without income, none of this matters. Everything works in reverse.
My advice to everyone is this : if you want to grow big next year especially in your finances. Be willing to make investments. Saving is great but investing puts you on a pedestal where you wouldnt have to worry about savings as you do now. Thanks to larysa Caba, my portolio is doing really great and im proud of the decisions i made last year.
I feel one Of the greatest challenges that we first timers face in the ma rket is that we end up losing all we have,making it difficult to find ourselves back to our feet. My biggest advice is to always seek the services of a professional just like I did when I ventured into it for the first time. Big thanks to Larysa Caba. I now make huge profits by weekly through her services while still learning to stand on my own.
I know Larysa Caba. she trades for everyone I meet. I met her twice at a meeting in Germany and after her lectures from Ella I had to personally ask her to be my financial advisor. she is definitely good.
I have never seen a trader as open and transparent as Larysa Caba with her clients. The way she decides to make a profit for her clients. she allows you to express your fears and she still rests your fears and that is my respect. I don't normally comment on videos, but this word should be included. she is really cool.
This is good, but theres no denying that assets scale well. 10% return in one year on 100k will do alot more for your quality of life than a 20% return on 5k. The point of these videos is to show that assets scale, but yeah they make it seem certain. Not accounting for standard deviations is a sign of a sloppy statistician.
Great video and a very important topic that does not get mentioned enough. Stocks are volatile and have the potential take your portfolio from profit to loss. You must have the psychology of a long term investor. That includes viewing a market/portfolio loss as a chance to buy discounted assets is essential for long term growth. ABB. It would have also been good to mention, when talking about net worth, that it’s all unrealized if it’s in the stock market. If you are counting your portfolio’s value in your net worth, you may want to consider making an adjustment that corrects it by a certain percentage. Be prepared for a scenario where your unrealized net worth can decrease.
What so egregious is that not even a $500k portfolio is enough to live on using something like the 4% rule, unless you drastically reduce your spending. So, in that sense, the $100k milestone is pretty meaningless. Then there's the volatility, so this stuff ends up being a nice bonus rather than a dependable tool in retirement, especially in a FIRE scenario. Best course of action is to significantly reduce one's spending and semi-retire. Maybe do Uber Eats or something like twice a week and sell 3% of your portfolio in up years. Don't sell in down years and pick up more shifts to cover your living expenses - ideally less than 60 hours/month, otherwise what's the point? It's not glamorous, but it works if you want to avoid having to work a regular 9-to-5 until you're 65.
Interesting! You'd rather do deliveries until you die than work full time until 65? I'm scared to ask what your current 9-5 is if that's how you're feeling! I'm being facetious here but I appreciate your input. Thanks for watching!
@@OneAndOnlyMe Well, then your portfolio would arguably worth more than $500k then right? Because you'd have an extra $250,000 - $500,000 in real estate. You could even build a small cabin for yourself and save a lot of money, but that's not for everyone. I'm extremely frugal, but even I don't go that far, but I figure I could do it for around $5k (including the cost of the land).
Nah I'd much rather work an extra 3-5 years full time earning good money than spend the rest of my life driving around delivering food for just over minimum wage...
You are a 100% right, finally somebody is telling the truth.The sad thing is that all those videos are the ones with the highest views because they sell and most people believe all that bullsh$t
Dude, thank you so much -- finally someone talks some real sense! I've only been investing for a couple years, but all these finfluencers are completely out of their minds thinking these returns last forever. I guess these videos appeal to younger people without much money or those who don't have a "feel" for financial markets. It's simply not true, your net worth doesn't explode after 100K. As often quoted, everyone's a genius in a bull market, especially now when making money doesn't take a huge effort. But that could change any minute... Edit: Also thank you for reminding folks about the possibility of losing 20% of your net worth/nest egg/portfolio/whatever in a single event. I lost a significant amount of money on Wednesday after the crash because I made a silly bet on Micron. But! Tax loss harvesting is a thing, so there's a silver lining there.
When Charlie Munger originally said this quote, 100k is similar to what a million would be today. Once you reach a certain velocity when your burn rate is way lower than saving. It gets very hard to spend popurtional to capital gains made.
Thoroughly enjoyed this video, especially touching on the use of averages and how most don't factor in variation (depicted by standard deviation), which is a given in the real world.
I’m surprised you didn’t even acknowledge the simple math that a 10x from 10k to 100k is the same as a 10x from 100k to 1000k. That is the simple math that is being used by the folks you criticize. A fair rebuttal needs to recognize some of the fair points of the other side. I will say that even though I tend to agree with the folks you are criticizing, you bring up some important extensions to the analysis. But none of your points defeats the simple math at the core here. Is a Monte Carlo analysis that shows ups and downs more realistic than a straight average? Could be, but that has some problems as well. You emphasize savings rate and just leaving the money alone to grow. Both good points. I wish I had done that more often over the years.
$100k in investments at an average ROI of 10% will generate about $10k per year in profit. Unless you have a low income you should probably be contributing much more than that, so your contributions will still be the majority of the growth.
This reminds me of John Cena who said he has one "watch" for perspective. One side is for when he feels he is not good enough and the other is for when he gets a big head. 1. The real risk is not that you may only get 800k but that many do not even start. 2. The closer you get to retirement the more realistic a view you will require to avoid an unplanned return to the workforce. 3. The other risk with assuming guaranteed earnings is that you start thinking leverage will always make sense.
If you are investing $10k a year, and average 10% (which is too high), then returns will on average be greater than the amount you are contributing each year, which is nice, but you are correct, it goes up and down, which means sometimes you make money and sometimes you lose money on paper. It doesn’t explode, the variance is more money. Still, I’d rather have $100k, than not 😮
I agree. Only time there’s an “explosion of wealth” is if the person gets super lucky which likely isn’t going to be consistent. What is motivating though is seeing how much your investments are working for you over time. Fidelity has a chart that shows your portfolio amount and how much cash you’ve contributed. I’ve only been investing significant amounts for about 8 years and the biggest growth is how much I’ve been able to contribute. Early on it was a bit depressing since the returns were much less than the contributions. Only until last year has the gap between portfolio and amount contributed started growing by a good amount. This is mainly due to 2024 being a good year in the market which will help future years. Hope the trend continues!
Finally, someone pointed the reality out. A lot of financial conversations I come across conveniently omit mentioning the economic downturns over the period of investment. Also, from a late millennial perspective, I feel that while the game is the same, the rules have changed. Wealth does not grow meaningfully at $100k; with the current inflation and sheer cost of existence, even a 10-12% growth does not make a meaningful change to your life. Let alone, saving $100k over 8 years would probably wipe out 1/3 of that value in today's terms.
I wouldn't use the word, "explode" until you reach $500k or more. The median income is $81k and using a 10% number you'll earn approx. $50k. That's more than a large sun will make. $100k makes you feel good and pushes you towards the next $100k or $1M!
It is true that past performance is not an indication of future return, but it’s the next best thing. Over the last century, adjusted for inflation, the sp500 still returned 7.4%. This includes world war time, Great Depression, pandemics, terrorism, and so on. It is fairly reasonable for me to believe that this could happen again for the next century. If it doesn’t, well it sucks for everyone but the ones investigating are still doing better than those who don’t.
9:58 Literally shows the s&p 500 had an annualized return of 9.5% in that 20 year period, which most of those people you bashed suggest you do, which is invest in an etf like VOO and DCA. Shows a chart of a 20 year period and then says it’s a 30 year study…remember how you were mocking Ramit for showing 40 instead of 30? Whatever, right? You want to bring up what the cost of a 1% to 2% financial advisor fees would add up in 30 years compare to 0.06% expense ratio with VOO?
He's just pointing out that most people don't have the discipline which is fair. Remember if you get out for whatever reason, over a 10 year period, missing the best 10 days of the market and your returns get cut by more than half. Stick to the plan and you should be fine, if you read the Simple Path to Wealth and you'll see even JL Collins tried to time the market at one point
@izzyinsync discipline has nothing to do with it. These are averages and they all tell you what they assumed. I mean this guy is clickbait and actually you want it to go down if you don't need to take the money out
Good points. Next do a video bashing The Money Guy. He says similar things about $100K. The negative Nelly videos are very popular!!! Keep up the good work!
I strongly feel that those videos telling you that money will "explode" after a certain amount are just to grab your attention. I just take in the positive lessons of developing the habits that won't leave you broke in your later years. Save, invest with cautious optimism and some degree of luck will get you somewhere as opposed to spending carelessly. Kudos to your channel. Happy Holidays!
Very informative video you have, I have been able to understand the messages you pass but there are some other challenges that may come about when taking some other risks
Because $100K is a nice, round number and it makes people hopeful. The reality is compounding works on any number and the best gains will come from buying the dip and seeing it recover.
Okay so half of people who invest could be close to being at $1mn. That's pretty good. I watched those videos and I don't see where they are guaranteeing anything, they are simply saying it's possible, and for people investing in ETFs and index funds, most people will come out on top (come away with more money than they put in).
Doesn't this assuming that any given year you are having a underperforming year vs overperforming year is equal because that makes a difference due to compounding is more powerful with consecutive bull years vs bear years. Just curious because i think thats why we have the average return being 10% instead of 7%. I just wanted to point this out because bull years can be consecutive for 3-4 years while bear markets last no more than 18-24 months in most cases.
Really depends what you're investing in. Yes my network worth or more specific my portfolio has exploded. But in addition to my 401k, I take more risk in my taxable account via single stocks and leveraged etfs. YTD up 200% thanks to TSLA and PLTR
These gurus don't understand how averages work. Well-above average returns (1970s & 1990s) that imply well-below average returns sometime in the future (1970s and 2000-2010). You might need to invest for 50+ years to get 8% average across the entire period
You know the Treasury market has outperformed the equity market for at least 40 years. You rarely hear anyone talk about that or differentiating between the concepts of saving (you want the money back) and investing. Buying Zero coupon or Treasury Strips seems more like building a true pension portfolio than equities. Just my humble opinion. Most people will not agree with this and that's ok.
I really do like Ramit, and quite honestly he’s one of the more conservative in this space that I’ve found, and that’s who I try and stick with (same reason I’m subscribing to your channel). I was one of those who got into crypto in 2019-2020, and was like OH I’M GOIING TO BE RICH!” Well I quickly learned I had zero clue what I was doing, and instead changed paths to S&P 500, set it, and forget it. Will it go down? 100%. Do I feel better knowing it’s not obscenely volatile like crypto? Yea
Dude no one actually thinks returns are going to be 7% annually guaranteed. It’s the stock market. That’s why investors get high returns because of the risk we take that the stock market can go down or up on any given day. Ramit has never said returns are guaranteed, he just shows the average and what it could potentially be. Never said it’s guaranteed , nothing is. He has never advocated for just the S&P either. He’s actually always advocated for target date funds which is probably best for people who are not educated about the market
After watching this, I understand that it’s not guaranteed, but taking out the inflation adjustment and assuming an average of 2% inflation…many of those scenarios would likely be over 7 figures…just not in today’s money. My concern is not factoring in my expense ratios…those could prevent it from reaching 7 figures if they are too high, right?
Does this simulation account for positive investor behaviour change though? I invest in Vanguard's Global All Cap fund to maximise diversification. If the market drops, I buy more shares during those periods. This week my shares dropped by nearly 3 percent so I stuck an additional £300 in whilst the shares were a few pounds cheaper. If the market drops precipitously then I plan to put all of my spare money each month in and grab as many shares as possible whilst the price is down. When the stock market is growing I just stick to my standard order investment and don't add any additional share purchases for those months. I would imagine this is what a lot of investors do. I'm not far enough into my journey to hit 100K yet, currently at £30,000 but is my thinking here correct? I've been looking forward to a large stock market crash and a protracted bear market if it comes in the next couple years as I'm a good 18 to 20 years away from retirement. Obviously closer to the time it would be a bigger concern, but I'll be investing in alternatives to just equities by then.
REITs are basically the real estate version of stocks, instead of owning a share of a company you own a share of an investment property (or set of properties). I wouldn't invest in REITs expecting substantially higher returns than stocks, in both cases there's a lot of variance but the long term averages are pretty similar. However, a good REIT index does help with diversification. Although there's some correlation between real estate and equity markets, when your S&P500 index fund is down 40% your REIT index might only be down 10%.
If you make from 10k to 100k you make 10x, from 100k to 1M its 10x too but way slower because your buys will be less significant increasing the portfolio, if you buy 5k annually thats a good amount if you have 50k, but way less significant if you are at 500k
I've moved up extremely quickly over the past few years because I kept buying throughout both the 2020 and 2022 downturns. I'm very happy with my portfolio moving forward. I look at portfolio every day since I buy a set amount weekly. I only sell during euphoric times to rebalance usually every 5 years or so.
Finally, someone has said growth and not interest regarding compounding! I've added comments for several vids asking why they've stated compound interest => none replied The linear growth just looked like a work of pure fiction. I've seen my portfolios grow but it's never linear
All good investors know to save and invest consistently every month. When the markets are lower, you acquire more shares. After 5 -10 years ($100,000) your contributions almost don't matter to the growth. Portfolio 'explodes'.
What percentage of the population would you say actually does this? 5%? People tend to invest after periods of high returns and pull money out at the bottom. It's human nature! But giving in to that human nature leads to the wrong kind of portfolio explosion
Agree that the message from these finfluencers is a bit basic but it is better to be invested over many years/decades. And it’s certainly not like you can stop investing once you reach 100k
I thought it was because once you reach that $100k, you go from a scarcity to an abundance mindset. It took me ten years to get to $100k, but went from that to a million in less than a year. It is like the universe is working with you at that point. Plus I stopped panhandling to survive. I can concentrate on what I really love which is making video games. If one takes off, it could easily pull in a few million. If not, I am still okay.
despite you kind of mocking them (not necessary) they mean well, they actually provide good financial advice and any financial advice is better than most garbage on the internet today i did not know about this monte carlo simulation so i'll definitely check it out! thanks for the advice i will say that the Psychology of Money talks about compounding and even Warren Buffet has said it many times so they're not the only ones saying that
I do understand what you’re saying but I think you’re missing the general point of what the videos are focused on. They’re using the term “explode” to simply get people to understand that the same return on a larger number equals a larger gain and over time, that compounds. Of course there will be bad years, but if you look at it over a long enough period of time, the number will generally rise. For someone who is trying to get to 100K invested, an 800K future scenario and a 1M future scenario are both better outcomes than the present scenario
Very interesting video. Thank you. I will subscribe. I wonder if historical returns confirm the affirmation that your can't lose money if you consistently invest for twenty years.
Do you think it's impossible? This is showing it's highly improbable but not impossible. But I also agree with you in that the model using his forecasted returns is creating some lower long term results than one would perhaps expect.
It's not really like that. My understanding is that the forecast is point-in-time. So those kinds of situations are where the market has been higher in the intervening period during the buying phase and then has a massive crash just at the time when you need to sell. Most of the time we combat this by not making plans that require us to liquidate all our assets on one specific date in 30 years time. What it is really saying is there is a no negligible chance that on that specific selling date we will be in the bottom, but of course what we actually do is have a long selling phase. We try to buy the average and sell the average. Peak to trough or peak to peak is not a plan.
Excellent video, I really appreciate how you try to show how things are more complex that they seem, and we have to be ready when reality kicks in. Great job!
I did a simple buy and hold strategy coupled with broad market index funds and I hardly ever looked at my balances. I have no idea when I crossed the million threshold because I wasn't watching. And yeah, I can't point at any particular time when my net worth "exploded". But as the years go by you do see that your portfolio growth depends less and less on contributions. And eventually the contributions almost become a rounding error compared to movements in the market.
US stock market was down for 2000s anybody that dump their live savings on peak of the market if one would be DCA throughout decade they were all up as you see on chart how it progresses upward. So please down assume everyone was negative for a decade.
Totally fair and those are the years that set up for big portfolio gains in the future. But the investment itself was negative for the period, not up 7% per year. Money weighted matters but the other videos talk about time weighted. The point is, the market doesn't go straight up every year.
@@canadianmoneyroadmap well nothing goes up in the straight line but I know but I still think those guys trying to educate people as well so I wouldn’t judge them.
But it appeal our gambling addiction. And it is not entirely illegal. I'd say bet... I mean invest on stock market is nothing but a plus. You can always watch how the stock you bought perform, in red, and get all the excitement without having to go outside. That is a win for me!
Portfolio visualizer is a great tool to get familiar with the long-term dynamics of investment choices. The percentile trends lines can be misleading because the percentiles are evaluated for each intermediate year. It gives the false impression that if you start in the upper valuation percentile you will stay there for the duration, enjoying the exponential growth of the percentile you are currently in. Other tools show individual trajectories that show that you can be in the upper value percentiles in the middle of the period and still end up in the lower value percentiles at the end of the period. You can't escape from the point of the market cycle you are in.
I saved up 100k in one year nothing exploded. Only thing they say find a good stock that can give return Atleast 10x by 10 years that’s what exploding actually they say.
Ramit made the mistake and said interest is paid on everything. He meant to say DIVIDENDS are paid on all those things. Simple, honest mistake. Doesn't make his point any less relevant or valid.
Most investments have a blend of value, growth, dividend stocks, bonds etc and many more asset classes. 7% dividends on an average is not realistic even if the entire portfolio is made up of dividend stocks. The problem is that everyone tries to teach you compound interest in the context of investments and its not a good idea.
I have never heard anyone refer to dividends as "interest". The only substitute has been "distributions". Why would someone like him even make that mistake?
The correct term is "returns". Investments produce "returns" of all types. And, in some cases the returns are delivered as interest, or dividends, or capital appreciation or coupon interest, or a capital gain. Dividends are a type of "return". Interest is a type of "return". That is why we use the term "return on investment" to describe an or all of this.
My net worth ( including my house) is £2.5 milion. I still spend frugally and have to save 40% of my income to ensure my assets are serviced and I' m buffered against future financial shocks.
The point is solid, but too detailed for the average beginner viewer to digest. The simplicity and (baseline) principles Ramit and others are trying to teach make sense and ARE valid. (Even if the specifics are a bit more nuanced) I don’t think ANYONE questions the fact that your portfolio will grow faster after 100k than it did at 1k. (Assuming equal contributions). “Exploding,”….thats a subjective metric, and a term likely used to generate clicks rather than teach an idea.
It’s took me 1 yr to take £3k to £20k and that’s taking £4250 out after 6 months . The ‘Gurus’ give you an idea of what’s possible weather their doing it or not . People can do better than their think if their just took action . Your average financial advisor don’t do anything exceptional especially considering it’s suppose to be their job .
You obviously don't listen to Remit on a regular basis. He goes over people's debt and how they should pay them off and not get into more debt with a big car payment etc... Also , if you invest in etfs that pay you dividends and you reinvest those dividends once you reach 100k it would grow alot faster if you continue to invest while reinvesting your dividends.
Even if they are wrong and you will end up with 500k instead of a million, it is still better than not investing. Sometimes, the journey toward is better than destination.
You know what's the difference between a million and 500k? That's right, 500k
Not much better if you assumed you would have a million
@@rburk121 Well, if you went 30 years without looking at your portfolio and changing anything, you deserve to be short 500k....🤷
It’s more about the discipline, if you manage to save $100,000 you’ll establish very good financial habits
This!
Yes, but you still need to continue after you hit that first 100K.
Yes, the habit and the financial resources to get to $100,000 are key. The future is not guaranteed in the way that many UA-cam videos would have people believe.
Not wrong, but the clickbait titles indicates something magical happens at that arbitrary point. It's almost like they're reverse engineering content from the YT algorithm.
@@BelleDividendsThe whole point of a habit is it's built for continuing, so no worries there
At 300k and it still feels like a slow crawl.
I'm at around 580k and it's the same feeling!
680k and feel the same, 5% average annually after fees over the last 12 years
Im at 238k in aug to 261k as of now 😊
and I doubled my capital just this year. Buy great companies when they are on discount.
Tf do you mean? 30K per year interest = Probably more than you add to your investments pet year. People are insanely impatient.
It took me 14 years to get to my first 100k but only 2 years to get to 180k!
That's because our government printed off a ton of money and inflated everything over the last few years. If you look at what the money will actually buy (ie how many months of rent and groceries are your investments worth) it's barely changed.
I think this video is a bit overly pedantic. None of the UA-camrs you shared are claiming the market will go up 10%/yr, every year. It is clear, especially in context of their other videos, that they are referring to the historical average. Someone with $100k invested is obviously going to grow in bigger increments than someone with $1k or $10k. Of all the financial advice to criticize on the internet, this was not a strong pick. Meanwhile you've got Dave Ramsey giving actually dangerous advice like saying that retirees can pull out 8-12%/yr from their investments and never run out of money.
No, but his point was that the historical average is not a guaranteed return. Someone could conceivably invest consistently for 30-40 years and see their portfolio mostly rise in value over all that time, but then a couple years before they retire something catastrophic happens, the stock market crashes, and their investments shrink in two years to the point that all their investments now only provided an average 5% return over their lifetime. Now what? Do they wait to retire, hoping things course correct sooner rather than later? But what if they don't correct soon? What if it takes another 10 years to get back to their highest high? Surely, given enough time, their portfolio will rise again, reaching the 7-10% average return, but how long will that take?
This is why I'm planning two separate retirement accounts. One safe, low-return portfolio to immediately live off of when I retire, and another to continue to grow if the market is struggling when I retire. For a time, I'll be able to withdraw from my safe account, waiting for the right opportunity to shift my riskier account to safer investments to live off of later if need be.
I tend to agree. There's good info in here - and it is *absolutely* important to make it clear to people that investing isn't just a higher percentage savings account. I've never thought that myself, but I guess some people could. Yes, things go up and down: I started investing seriously in May 2017 and I see lots of jaggedness and volatility, and my returns did go negative (barely) around December 2018 and March 2020, and 2022 went down overall. But overall, I'm made out pretty well in the past 7 years, basically just doing SP500 and total stock market index funds, continuing to buy regularly, and basically only selling because I needed cash out for a couple of larger purchases. ...Granted, people's strategies are different, asset allocation is important (and I'm admittedly stock heavy), not financial advice, etc., etc.
Fair point that people shouldn't be overly positive about investments to the point of being misleading; totally fair! And people should be careful about investing and not just follow everything influencers say; also totally fair! But I think this comes across as a little too negative; even shows which may underplay the impact of volatility may have a lot of good advice because they are trying to encourage people to invest. Of course, that's just my take, and I'm sure many will disagree.
I think Ramsey has some decent advice for people getting out of debt, but it's clear he has no clue how the market works long term. A lot of his assets are tied up in real estate anyways. 4% makes the most sense for most people, but most people living off of their investments alone should be prepared to live on less than that depending on how young they retired. 3% is a much safer number to plan on in "worst case" scenarios if the market is down and you don't have liquidity or a side gig to fall back on.
The problem with promoting 'averages' is people can assume the market is a guaranteed annuity. They're not prepared for a crash that takes 6-10 years to recover.
Took 33 working years to hit $100k. Took 4 working years to hit $200k. Less than 1 working year later I am approaching $250k.
Closer to an explosion than a crawl.
Can I assume you paid off the house and invested the mortgage payment or most of it?
You have to consider the whole context. For sure the last few years have been very good for markets. But that is a coincidence.
Yeah i feel that. I get he is saying to be a little more cautious, but most people will agree that their personal experiance is it only starts growing quicker and quicker.
@@shawnpeterking No.
two back to back years of 25%+ returns will do that...
You are correct but this video risks demotivating people in investing. The best thing to do is to invest consistently for a long period and dont stop, no matter what happens. In many years time you will thank yourself, if you are able to wait out the down periods
I understand your point. What I disagree with is how many people portray the stock market as a magical money-making machine. The problem is that half knowledge is worse than no knowledge at all. If an individual does not know about risk management, the quality of assets, or the concept of panic selling, they could potentially end up hurting their financial lives. It particularly bothers me because I’ve met people on both ends of the financial literacy spectrum. The knowledgeable will survive one way or another, but what about the rest? The content is primarily targeted for those. While I really appreciate the efforts these finfluencers are putting in, I would love to see them include more details, risks, and a clear representation of both the worst and best-case scenarios.
If people don't that knowledge for selecting specific investments, there are plenty of indexed options that will help mitigate risk over time.
People need to know the stock market isn't likely to pay out like a slot machine. Consistent investment and time is what will give most people significant returns.
@@2696yogesh nothing is 100% guaranteed in the stock market, only more or less probable. You got the cycles as well, a lot to take into account. Might as well be a crash just as you got ready to reap your rewards over the years in the latter stage of your life. As some say, if I knew I would fall, I wouldn't get up on the first place. :) What I agree with, better to do with the best of your knowledge, than refrain from action at all, as the inflation will take it's toll.
With how hot the market has been this year, this video is a welcome reality check.
I think the exciting thing that all of these content creators are trying to communicate to beginner investors is that once the average person reaches 100,000 dollars invested, they start to see growth in their portfolio that exceeds what they are able to save with their income. This is hugely exciting for a new investor because it finally feels like their assets are working harder for them than they are at their job.
The part these creators don't mention is that with the upside there comes a downside. With 6 figures or more invested in the stock market there will be months and even years where investment losses also exceed earned income and investors need to be mentally prepared for that possibility.
Thank you for the video Evan.
Thanks for watching and for the thoughtful comment!
During bear markets, your portfolio total will continue to decrease regardless of how much you add & invest. You just have to keep steadily investing anyway. And bear markets are actually a blessing as they’re an opportunity to buy when the prices are low. It’s even been said that you should pray for bear markets here & there.
Great point. Love this comment.
Agree with this 100%. In early years it’s about building the discipline to save. In later years it’s about building the mental discipline to stay the course.
In down years I often see posts from new investors saying “why am I investing? I keep adding X every month and my account balance keeps going down.”
The internet desperately needed this reality check.
You completely missed the point of those videos. It is a mathematical fact that the more you have the more it growths. It may not happen every year but it happens on average.. for 70 years if you play safe like with the s&p 500
You pointed out the first 10 years of his investing he lost money 2000-2010. Which is incorrect, you would be assuming he lump sum bought at the start and didn’t DCA. Which is extremely unlikely. And actually the best case scenario someone staring would want. To buy and build a strong foundation during downturns at low prices.
i agree. i have been tracking my networth since 2004 with continuous investing without major moves in or out of the market. steady increase from 2004-2008 and then GFC hits. recovers pre gfc peak in 6/08 by 3/2010 and by 2012 or so resumes the upward trajectory being charted from 2004-2008 and not from a new lower baseline established by the global financial crisis. so i didn't "lose" money in 2000-2010 as i didn't sell.
I really don't think that these finfluencers are saying what you claim they are saying.
Agree. The main thing the fin-influencers are doing is to incentivize people to invest and save, and to develop a discipline of saving, and that's a good thing.
While you make some fair points, I think these fincluencers are not necessarily bad. They give solid advice on reducing debt, on avoiding fees and on financial discipline
Finally somone talks about these copy and paste financial videos
I went to uni with Nischa, one of the finance YTers mentioned, and her channel is a complete hoax. She has bought all her subscribers and views. If you look up channel analytics for her channel you can quickly see her numbers are fake 😂
I noticed that when I hit $100000.00. Still went up and down like normal. Kept investing, even through the 2020 happenings. Slow and steady.
The bigger the portfolio the greater the returns and at the same time the falls are devastating :)
Exactly, this is what I noticed.
Being a little harsh on Ramit here, his information is a little generic and simplistic, but he is pointing people in the right direction. If you are going to criticize youtube "financial exerts", there are many other people out there giving really terrible advice you could go after.
Honestly, fair enough. There's plenty of bad info out there and I love lots of what Ramit says about living your own rich life, managing investing costs and that home ownership isn't a requirement for financial success. But my gripe is about his investing content and since he has such a large platform, he should know better. Plus, since he's not scared of throwing rocks in the direction of financial planners indiscriminately, I think he can handle a couple jabs back his way :)
Fair.
Follow up here…. From what you see, who are the others giving really terrible advice? Don’t name them publicly please but shoot me an email at hello@evanneufeld.com. I’m curious about what else is out there.
Facts Ramit is good for the regular guy. It’s encouraging and points them on the right track. What this video does is discourage people from investing. Which is wrong. Nobody knows the exact outcomes but if you invest long term your future outcome is definitely better than those who don’t.
Also its weird to say that the stock market doesnt have "compounding". First there are dividends but even excluding that, if you have $100k and the stock market goes up 10% for rounded numbers you made $10k. If the next year the stock market goes up 10% you get more than $10k because you also earn off of your appreciated asset base. That is compounding.
To add on, Charlie Munger coined this originally in the 1990s. If there were a theoretical point where it explodes, it would be around $200k in today's money, not $100k
In my opinion the number is at the point where your investment is contributing and similar amount to yourself. If you can contribute 10k every year and your portfolio grows 10K that’s a huge milestone where your money is working just as hard as you are.
Wages have stagnated. Don’t base it on inflation.
@@userofsharingan Yep, so it really just depends on your savings rate. Someone earning $80k and saving 15% would contribute $12k per year, so for them the amount would be about $120k. Someone earning $200k and saving 25% would be contributing $50k per year, so the point where their portfolio generates as much as they contribute would be around $500k.
Season's greetings, everyone! 🎄 The most important thing on everyone's mind right now should be investing in different sources of income that don't rely on the government, especially with the current economic crisis. As we enter 2025, I encourage everyone to start investing now to secure a more stable financial future.
We invested $500 a week for 3 and a half years and recently hit $100k. For most of that time the portfolio was underwater but we just kept plugging away. Worst point was around halfway through when we'd invested $50k and the portfolio was at $43600 (approx). It was in the black in the last few weeks overall however. We'll keep investing regardless.
$500*52*3.5=$91000
Like yeah that's good to hit $100k but your investing $26k per year. The investment returns haven't really had time to make an impact. You would have done nearly the same in a good cash savings account.
A good memory aid is to think of two people:
you invest $1000 per year into global stocks between 2025 and 2035 and then you stop
Your friend starts investing in 2035 and invests $1000 a year into global stocks until 2065.
In 2065 the average expected total value of your investment between you and your freind is the same.
@@kxjx At the end of the day we started with nothing and we invested "something" consistently. We've got it up to $100k and have gone from having no financial plan to building up a good nest egg. This is only part of our investments.
I like Ramit. He is a positive dude and I’m pretty sure he helps a lot of ppl in the course of his business,but this example? He was pulling it outta his ass. Details matter. Stocks don’t pay ‘interest’,but I notice a ton of people talking about compound ‘interest’ who don’t seem to know the difference between compound interest and compound growth. They’re not the same thing.
I generally like Ramit too honestly. His podcast talking to couples is really interesting! But he gave me some low hanging fruit here so I thought it would be worth picking away at.
Thanks for your comment!
There was a big debate years ago about that... in the end, it doesn't freaking matter. Is there a difference between the two, of course... but you have to speak in terms people can actually understand. Otherwise, your videos will fall flat and those people won't see that content in the first place
I figured "interest" was a simplistic term to help people understand. But he has fallen into the trap he's warned high performers for years: The world wants you to be vanilla, and they will abandon you as soon as you are. He is getting more and more diluted on youtube, as he aims to cater to the general audience.
My investment wealth exploded when I got fired from my last job, then searched desperately for a new job, then foolishly cashed out much of my 401K while unemployed, then by sheer coincidence got a NYC job that paid three times what I was making before. I swear, it all feels entirely too much like luck than education, hard work, knowing people, location, etc...
It is luck. But education work networking and perseverence increase your chances of getting lucky
Net worth explodes around 500-600k for your average future millionaire/multimillionaire.
On Reddit I recommend, as a crude method of adjusting for risk, that people run the long term numbers at 7-8% and then chop that number in half. Assume a range of outcomes ($1-2 Million) not a fixed number ($2.25 million)
Appreciate the perspective. I also find it obnoxious how everyone repeats the same thing, not just regarding your net worth "exploding" at $100k but personal finance content in general. It's all so repetitive.
A lot of what you're saying seems to be arguing semantics i.e. referring to portfolio returns as interest or saying "net worth" instead of investment portfolio. You're not wrong, I just don't think it's the biggest deal. A lot of people find finance and the jargon intimidating so it makes sense that finfluencers are trying to dumb it down to reach more people.
Regarding the 7% claim, the S&P 500 has averaged a 7.5% annual return over the last 100 years. Of course, past performance doesn't indicate future results and returns vary greatly year over year, but over a long period of time I think 7% is a fair expectation. This point is usually made in these types of videos, with the main message being to stay the course regardless of annual performance.
You're right that the semantics aren't the biggest deal but if you're going to teach people about money, you need to understand what the words mean. A stock portfolio doesn't pay interest. Understanding that matters. Finance language is intimidating for sure but it doesn't mean we need to use wrong language to make it accessible.
I'm fine with discussing averages but my whole point is that the path to average isn't a straight line. It gives people the wrong idea of what should be expected.
Yup, just keep investing.
I mean yeah corrections happen, but the market has never not recovered and grown. It's about length of time in the market
agreed! But easier said than done for most people and if they expect it will always go up, they don't know what to do when it inevitably goes down again in the future.
@@canadianmoneyroadmap for sure, messing with your portfolio is gonna be a loss more of the time than it will benefit
@@canadianmoneyroadmap Also, the market may always recover, but we can't tell how long it will take. In the case of the Japanese stock market - 40 years. That's a long time to be in the red.
Someone did a scenario on the Nikkei index and found that if you dollar cost averaged into it, even during the Lost Decades, you would still come out ahead. A lesson to stay invested and be consistent over the long term.
@ ahead in real terms?
1. What are the “portfolios” they actually use to run the simulator? 2. 833 per month regardless of the market situation? You realise the right strategy in doing that is DCA into a Strong support level of the price action strategy to approximately actualize the 10% annual gain right. 3. Do they even select the top ETF tracking S&p500 with the best expense ratio? You are making a highly conjectured video without much in-depth understanding of index fund. Basically painting it with a wide brush.
Pretty nitpicky TBH. Monte carlo is also not terribly accurate, since it doesn't account for actual stock market behavior. If it's down one (or more) years, it usually goes up the next year(s)! Monte carlo does not do this. You can have a -25% year, followed by 6 years of 0-8%. Not at all realistic. I'd preferred if you used historical data.
And in any case $100k is just an arbitrary number to strive for. Also somewhere around there the returns might start to outpace the contributions for most people
Great stuff. People need to see this stuff.
I became a millionaire (net worth) around 32-33 which sounds CRAZY when I type that out, but it’s mainly just tied up in the equity of my home, or in a retirement savings account (Live in Aus.)
We still live no different to how we did in our 20s, conservatively and always saving/investing. We don’t splurge, I work part time which is nice, but it’s nothing like people would expect. Investment income/returns are still vastly smaller than salary/wages, and it still requires lots of discipline and patience to build wealth. There aren’t any shortcuts.
Smashed the like button within 20 seconds of the video!
I watched Ramit's recent video about how it will take 20 more years to go from 100k to 1 million, which he says is 10x in only 3x the time it takes to get to 100k under the same assumptions.
I get the point. I get that there's compounding. You should be investing in the stock market. I get that time works well in your favor the longer you let it cook.
But it is still a slow process to 1 million (or whatever your goal is) unless you ramp up your contributions. Hardly an explosion. I don't want to wait 20 years if my goal is to watch my net worth explode.
It's the same as going from 10k to 100k. Exponential curves are exponentials at all points of the curve.
Hello. I'm new here. The UA-cam algorithm brought me here. I consume A LOT of personal finance videos. I appreciate that you are a CFP. You are right about the math. It took many years of watching numbers to realize that the greatest wealth builder is your income and a standard of living dramatically below your income so you can save aggressively. I hear people say it over and over again, that your income is your greatest wealth builder, but you can't really feel that impact until you are out of debt and living well below your means and putting money to work in assets, whether those assets be CDs at your bank or ETF stocks or real estate. These things take years, and aiming for 100k has allowed me to put my money to work, and THAT is helping me feel like I am getting ahead when combined with my income. Without income, none of this matters. Everything works in reverse.
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Making over 48k monthly is all because of her.
I feel one Of the greatest challenges that we first timers face in the ma rket is that we end up losing all we have,making it difficult to find ourselves back to our feet. My biggest advice is to always seek the services of a professional just like I did when I ventured into it for the first time. Big thanks to Larysa Caba. I now make huge profits by weekly through her services while still learning to stand on my own.
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I have never seen a trader as open and transparent as Larysa Caba with her clients. The way she decides to make a profit for her clients. she allows you to express your fears and she still rests your fears and that is my respect. I don't normally comment on videos, but this word should be included. she is really cool.
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This is good, but theres no denying that assets scale well. 10% return in one year on 100k will do alot more for your quality of life than a 20% return on 5k. The point of these videos is to show that assets scale, but yeah they make it seem certain. Not accounting for standard deviations is a sign of a sloppy statistician.
Great video and a very important topic that does not get mentioned enough. Stocks are volatile and have the potential take your portfolio from profit to loss. You must have the psychology of a long term investor. That includes viewing a market/portfolio loss as a chance to buy discounted assets is essential for long term growth. ABB.
It would have also been good to mention, when talking about net worth, that it’s all unrealized if it’s in the stock market. If you are counting your portfolio’s value in your net worth, you may want to consider making an adjustment that corrects it by a certain percentage. Be prepared for a scenario where your unrealized net worth can decrease.
What so egregious is that not even a $500k portfolio is enough to live on using something like the 4% rule, unless you drastically reduce your spending. So, in that sense, the $100k milestone is pretty meaningless. Then there's the volatility, so this stuff ends up being a nice bonus rather than a dependable tool in retirement, especially in a FIRE scenario.
Best course of action is to significantly reduce one's spending and semi-retire. Maybe do Uber Eats or something like twice a week and sell 3% of your portfolio in up years. Don't sell in down years and pick up more shifts to cover your living expenses - ideally less than 60 hours/month, otherwise what's the point?
It's not glamorous, but it works if you want to avoid having to work a regular 9-to-5 until you're 65.
Interesting! You'd rather do deliveries until you die than work full time until 65? I'm scared to ask what your current 9-5 is if that's how you're feeling!
I'm being facetious here but I appreciate your input. Thanks for watching!
If you pay off a mortgage by the time you're 50, you absolutely can live comfortably on the income generated by a 500k portfolio.
@@OneAndOnlyMe Well, then your portfolio would arguably worth more than $500k then right?
Because you'd have an extra $250,000 - $500,000 in real estate.
You could even build a small cabin for yourself and save a lot of money, but that's not for everyone.
I'm extremely frugal, but even I don't go that far, but I figure I could do it for around $5k (including the cost of the land).
Nah I'd much rather work an extra 3-5 years full time earning good money than spend the rest of my life driving around delivering food for just over minimum wage...
I am glad finally someone called out on Ramit and other finfluencers. I liked the critical analysis.
You are a 100% right, finally somebody is telling the truth.The sad thing is that all those videos are the ones with the highest views because they sell and most people believe all that bullsh$t
Dude, thank you so much -- finally someone talks some real sense! I've only been investing for a couple years, but all these finfluencers are completely out of their minds thinking these returns last forever. I guess these videos appeal to younger people without much money or those who don't have a "feel" for financial markets. It's simply not true, your net worth doesn't explode after 100K. As often quoted, everyone's a genius in a bull market, especially now when making money doesn't take a huge effort. But that could change any minute...
Edit: Also thank you for reminding folks about the possibility of losing 20% of your net worth/nest egg/portfolio/whatever in a single event. I lost a significant amount of money on Wednesday after the crash because I made a silly bet on Micron. But! Tax loss harvesting is a thing, so there's a silver lining there.
Thats why they tell you to invest in the s&p 500 and never looking at it.
When Charlie Munger originally said this quote, 100k is similar to what a million would be today. Once you reach a certain velocity when your burn rate is way lower than saving. It gets very hard to spend popurtional to capital gains made.
I heard it would be around 250k these days actually.
@JarinCOD if you're going off CPI figures, then yes. I prefer using M2 money supply.
Agree. At least 1m today’s money.
@@JarinCOD I would agree. 250k is the kick off point. That said, for many people 100k is a significant achievement in itself.
@@OneAndOnlyMe for sure
This year was EXTREMELY choppy. Glad you outlined this.
Thoroughly enjoyed this video, especially touching on the use of averages and how most don't factor in variation (depicted by standard deviation), which is a given in the real world.
I’m surprised you didn’t even acknowledge the simple math that a 10x from 10k to 100k is the same as a 10x from 100k to 1000k. That is the simple math that is being used by the folks you criticize. A fair rebuttal needs to recognize some of the fair points of the other side.
I will say that even though I tend to agree with the folks you are criticizing, you bring up some important extensions to the analysis. But none of your points defeats the simple math at the core here.
Is a Monte Carlo analysis that shows ups and downs more realistic than a straight average? Could be, but that has some problems as well.
You emphasize savings rate and just leaving the money alone to grow. Both good points. I wish I had done that more often over the years.
$100k in investments at an average ROI of 10% will generate about $10k per year in profit. Unless you have a low income you should probably be contributing much more than that, so your contributions will still be the majority of the growth.
This reminds me of John Cena who said he has one "watch" for perspective. One side is for when he feels he is not good enough and the other is for when he gets a big head.
1. The real risk is not that you may only get 800k but that many do not even start.
2. The closer you get to retirement the more realistic a view you will require to avoid an unplanned return to the workforce.
3. The other risk with assuming guaranteed earnings is that you start thinking leverage will always make sense.
If you are investing $10k a year, and average 10% (which is too high), then returns will on average be greater than the amount you are contributing each year, which is nice, but you are correct, it goes up and down, which means sometimes you make money and sometimes you lose money on paper. It doesn’t explode, the variance is more money. Still, I’d rather have $100k, than not 😮
I agree. Only time there’s an “explosion of wealth” is if the person gets super lucky which likely isn’t going to be consistent. What is motivating though is seeing how much your investments are working for you over time. Fidelity has a chart that shows your portfolio amount and how much cash you’ve contributed.
I’ve only been investing significant amounts for about 8 years and the biggest growth is how much I’ve been able to contribute. Early on it was a bit depressing since the returns were much less than the contributions. Only until last year has the gap between portfolio and amount contributed started growing by a good amount. This is mainly due to 2024 being a good year in the market which will help future years. Hope the trend continues!
Then you adjust it for inflation and realize you actually didn't go anywhere the government just printed off a ton of money...
Finally, someone pointed the reality out. A lot of financial conversations I come across conveniently omit mentioning the economic downturns over the period of investment. Also, from a late millennial perspective, I feel that while the game is the same, the rules have changed. Wealth does not grow meaningfully at $100k; with the current inflation and sheer cost of existence, even a 10-12% growth does not make a meaningful change to your life. Let alone, saving $100k over 8 years would probably wipe out 1/3 of that value in today's terms.
I wouldn't use the word, "explode" until you reach $500k or more. The median income is $81k and using a 10% number you'll earn approx. $50k. That's more than a large sun will make. $100k makes you feel good and pushes you towards the next $100k or $1M!
It is true that past performance is not an indication of future return, but it’s the next best thing. Over the last century, adjusted for inflation, the sp500 still returned 7.4%. This includes world war time, Great Depression, pandemics, terrorism, and so on. It is fairly reasonable for me to believe that this could happen again for the next century. If it doesn’t, well it sucks for everyone but the ones investigating are still doing better than those who don’t.
Great video. The insights about behavioral mistakes is quite helpful and true.
9:58 Literally shows the s&p 500 had an annualized return of 9.5% in that 20 year period, which most of those people you bashed suggest you do, which is invest in an etf like VOO and DCA. Shows a chart of a 20 year period and then says it’s a 30 year study…remember how you were mocking Ramit for showing 40 instead of 30? Whatever, right? You want to bring up what the cost of a 1% to 2% financial advisor fees would add up in 30 years compare to 0.06% expense ratio with VOO?
He's just pointing out that most people don't have the discipline which is fair. Remember if you get out for whatever reason, over a 10 year period, missing the best 10 days of the market and your returns get cut by more than half. Stick to the plan and you should be fine, if you read the Simple Path to Wealth and you'll see even JL Collins tried to time the market at one point
@izzyinsync discipline has nothing to do with it. These are averages and they all tell you what they assumed. I mean this guy is clickbait and actually you want it to go down if you don't need to take the money out
Guy also says that mean=average 😂 lost all credibility at that point
@@jozsefkovacs5017 mean does mean average homie, you might be getting confused with median
Good points. Next do a video bashing The Money Guy. He says similar things about $100K. The negative Nelly videos are very popular!!! Keep up the good work!
I strongly feel that those videos telling you that money will "explode" after a certain amount are just to grab your attention. I just take in the positive lessons of developing the habits that won't leave you broke in your later years. Save, invest with cautious optimism and some degree of luck will get you somewhere as opposed to spending carelessly. Kudos to your channel. Happy Holidays!
Very informative video you have, I have been able to understand the messages you pass but there are some other challenges that may come about when taking some other risks
I was thinking about why does everyone one of these channels make the same thumbnail about this one topic, felt like they were all in a group chat
Because $100K is a nice, round number and it makes people hopeful. The reality is compounding works on any number and the best gains will come from buying the dip and seeing it recover.
Okay so half of people who invest could be close to being at $1mn. That's pretty good. I watched those videos and I don't see where they are guaranteeing anything, they are simply saying it's possible, and for people investing in ETFs and index funds, most people will come out on top (come away with more money than they put in).
Doesn't this assuming that any given year you are having a underperforming year vs overperforming year is equal because that makes a difference due to compounding is more powerful with consecutive bull years vs bear years. Just curious because i think thats why we have the average return being 10% instead of 7%. I just wanted to point this out because bull years can be consecutive for 3-4 years while bear markets last no more than 18-24 months in most cases.
Is the standard variance model that you use here the right tool? Where does the 16 standard deviation come from? I have no clue so I'm just curious
Really depends what you're investing in. Yes my network worth or more specific my portfolio has exploded. But in addition to my 401k, I take more risk in my taxable account via single stocks and leveraged etfs. YTD up 200% thanks to TSLA and PLTR
I went up 7 grand last week and down 10 in the last two days. Meh. Stuff happens. You aren't going to trend on a smooth steady curve
Finally someone called out this bs
Why not do a backtest instead of probabilities. Just invest 100 dollars since 2000 every 10th of the month and see the results.
These gurus don't understand how averages work. Well-above average returns (1970s & 1990s) that imply well-below average returns sometime in the future (1970s and 2000-2010). You might need to invest for 50+ years to get 8% average across the entire period
You know the Treasury market has outperformed the equity market for at least 40 years. You rarely hear anyone talk about that or differentiating between the concepts of saving (you want the money back) and investing. Buying Zero coupon or Treasury Strips seems more like building a true pension portfolio than equities. Just my humble opinion. Most people will not agree with this and that's ok.
I really do like Ramit, and quite honestly he’s one of the more conservative in this space that I’ve found, and that’s who I try and stick with (same reason I’m subscribing to your channel). I was one of those who got into crypto in 2019-2020, and was like OH I’M GOIING TO BE RICH!” Well I quickly learned I had zero clue what I was doing, and instead changed paths to S&P 500, set it, and forget it. Will it go down? 100%. Do I feel better knowing it’s not obscenely volatile like crypto? Yea
If he is dollar cost averaging it would be better, look at all the low points. Does the chart include dividends.
Dude no one actually thinks returns are going to be 7% annually guaranteed. It’s the stock market. That’s why investors get high returns because of the risk we take that the stock market can go down or up on any given day. Ramit has never said returns are guaranteed, he just shows the average and what it could potentially be. Never said it’s guaranteed , nothing is. He has never advocated for just the S&P either. He’s actually always advocated for target date funds which is probably best for people who are not educated about the market
Another one is "if you miss the best 10 trading days, blah, blah."
Net worth EXPLODES (or IMPLODES) when you discover deep OTM options before an earnings event.
After watching this, I understand that it’s not guaranteed, but taking out the inflation adjustment and assuming an average of 2% inflation…many of those scenarios would likely be over 7 figures…just not in today’s money. My concern is not factoring in my expense ratios…those could prevent it from reaching 7 figures if they are too high, right?
Does this simulation account for positive investor behaviour change though? I invest in Vanguard's Global All Cap fund to maximise diversification. If the market drops, I buy more shares during those periods. This week my shares dropped by nearly 3 percent so I stuck an additional £300 in whilst the shares were a few pounds cheaper. If the market drops precipitously then I plan to put all of my spare money each month in and grab as many shares as possible whilst the price is down. When the stock market is growing I just stick to my standard order investment and don't add any additional share purchases for those months. I would imagine this is what a lot of investors do.
I'm not far enough into my journey to hit 100K yet, currently at £30,000 but is my thinking here correct? I've been looking forward to a large stock market crash and a protracted bear market if it comes in the next couple years as I'm a good 18 to 20 years away from retirement. Obviously closer to the time it would be a bigger concern, but I'll be investing in alternatives to just equities by then.
Refreshing. Call it like it is and don’t sugarcoat. Subbed
So based on that graph, REITs have done best over the 20 years?
There's a lot of fluctuation. That data was from 2021, if you look at the last 20 years from today the S&P500 has done better.
Can you explain more about REITs? It looks like they have the best returns over a 20 year period at 11%.
REITs are basically the real estate version of stocks, instead of owning a share of a company you own a share of an investment property (or set of properties). I wouldn't invest in REITs expecting substantially higher returns than stocks, in both cases there's a lot of variance but the long term averages are pretty similar. However, a good REIT index does help with diversification. Although there's some correlation between real estate and equity markets, when your S&P500 index fund is down 40% your REIT index might only be down 10%.
If you make from 10k to 100k you make 10x, from 100k to 1M its 10x too but way slower because your buys will be less significant increasing the portfolio, if you buy 5k annually thats a good amount if you have 50k, but way less significant if you are at 500k
I've moved up extremely quickly over the past few years because I kept buying throughout both the 2020 and 2022 downturns. I'm very happy with my portfolio moving forward. I look at portfolio every day since I buy a set amount weekly. I only sell during euphoric times to rebalance usually every 5 years or so.
Finally, someone has said growth and not interest regarding compounding!
I've added comments for several vids asking why they've stated compound interest => none replied
The linear growth just looked like a work of pure fiction. I've seen my portfolios grow but it's never linear
No, it's not a straight line, but we all know this. What you want is for your investment to track above your target.
All good investors know to save and invest consistently every month. When the markets are lower, you acquire more shares. After 5 -10 years ($100,000) your contributions almost don't matter to the growth. Portfolio 'explodes'.
What percentage of the population would you say actually does this? 5%?
People tend to invest after periods of high returns and pull money out at the bottom. It's human nature! But giving in to that human nature leads to the wrong kind of portfolio explosion
Agree that the message from these finfluencers is a bit basic but it is better to be invested over many years/decades. And it’s certainly not like you can stop investing once you reach 100k
I thought it was because once you reach that $100k, you go from a scarcity to an abundance mindset. It took me ten years to get to $100k, but went from that to a million in less than a year. It is like the universe is working with you at that point.
Plus I stopped panhandling to survive. I can concentrate on what I really love which is making video games. If one takes off, it could easily pull in a few million. If not, I am still okay.
despite you kind of mocking them (not necessary) they mean well, they actually provide good financial advice and any financial advice is better than most garbage on the internet today
i did not know about this monte carlo simulation so i'll definitely check it out! thanks for the advice
i will say that the Psychology of Money talks about compounding and even Warren Buffet has said it many times so they're not the only ones saying that
I do understand what you’re saying but I think you’re missing the general point of what the videos are focused on. They’re using the term “explode” to simply get people to understand that the same return on a larger number equals a larger gain and over time, that compounds. Of course there will be bad years, but if you look at it over a long enough period of time, the number will generally rise. For someone who is trying to get to 100K invested, an 800K future scenario and a 1M future scenario are both better outcomes than the present scenario
Very interesting video. Thank you. I will subscribe. I wonder if historical returns confirm the affirmation that your can't lose money if you consistently invest for twenty years.
7:00
That's a 10 % chance that stock market will rise annually by only 1 % on average in 30 years? I call complete BS.
Do you think it's impossible? This is showing it's highly improbable but not impossible. But I also agree with you in that the model using his forecasted returns is creating some lower long term results than one would perhaps expect.
It's not really like that. My understanding is that the forecast is point-in-time. So those kinds of situations are where the market has been higher in the intervening period during the buying phase and then has a massive crash just at the time when you need to sell. Most of the time we combat this by not making plans that require us to liquidate all our assets on one specific date in 30 years time.
What it is really saying is there is a no negligible chance that on that specific selling date we will be in the bottom, but of course what we actually do is have a long selling phase. We try to buy the average and sell the average. Peak to trough or peak to peak is not a plan.
Excellent video, I really appreciate how you try to show how things are more complex that they seem, and we have to be ready when reality kicks in. Great job!
I did a simple buy and hold strategy coupled with broad market index funds and I hardly ever looked at my balances. I have no idea when I crossed the million threshold because I wasn't watching. And yeah, I can't point at any particular time when my net worth "exploded". But as the years go by you do see that your portfolio growth depends less and less on contributions. And eventually the contributions almost become a rounding error compared to movements in the market.
Great Video!
US stock market was down for 2000s anybody that dump their live savings on peak of the market if one would be DCA throughout decade they were all up as you see on chart how it progresses upward. So please down assume everyone was negative for a decade.
Moreover you ran this on US stocks market which is not S&P 500. S&P 500 falls under US large caps.
Totally fair and those are the years that set up for big portfolio gains in the future. But the investment itself was negative for the period, not up 7% per year. Money weighted matters but the other videos talk about time weighted. The point is, the market doesn't go straight up every year.
Wanna guess what the Russell 2000 did during that decade? These creators almost exclusively discuss the S&P 500 so I showed the S&P500.
@@canadianmoneyroadmap well nothing goes up in the straight line but I know but I still think those guys trying to educate people as well so I wouldn’t judge them.
@@canadianmoneyroadmap I think you didn’t show S&P you used US markets which is Total market Index for S&P you gotta pick large cap US.
But it appeal our gambling addiction.
And it is not entirely illegal. I'd say bet... I mean invest on stock market is nothing but a plus.
You can always watch how the stock you bought perform, in red, and get all the excitement without having to go outside.
That is a win for me!
Question: So the lesson is yes, investing is a good thing that you should absolutely do, but have managed expectations ?
Portfolio visualizer is a great tool to get familiar with the long-term dynamics of investment choices. The percentile trends lines can be misleading because the percentiles are evaluated for each intermediate year. It gives the false impression that if you start in the upper valuation percentile you will stay there for the duration, enjoying the exponential growth of the percentile you are currently in.
Other tools show individual trajectories that show that you can be in the upper value percentiles in the middle of the period and still end up in the lower value percentiles at the end of the period. You can't escape from the point of the market cycle you are in.
I saved up 100k in one year nothing exploded. Only thing they say find a good stock that can give return Atleast 10x by 10 years that’s what exploding actually they say.
These are the best kind of videos. In depth discussion with practical examples. Thanks!
The annual average return is around 7% though, you just have to be patient even if the market goes down by 40% and wait.
Ramit made the mistake and said interest is paid on everything. He meant to say DIVIDENDS are paid on all those things. Simple, honest mistake. Doesn't make his point any less relevant or valid.
Most investments have a blend of value, growth, dividend stocks, bonds etc and many more asset classes. 7% dividends on an average is not realistic even if the entire portfolio is made up of dividend stocks. The problem is that everyone tries to teach you compound interest in the context of investments and its not a good idea.
@@andysol2002 7% DIVIDENDS?!?
Whoever said they would earn 7% dividends???
He definitely didn’t mean dividends. That would make even less sense than the misuse of the word interest given his examples
I have never heard anyone refer to dividends as "interest". The only substitute has been "distributions". Why would someone like him even make that mistake?
The correct term is "returns". Investments produce "returns" of all types. And, in some cases the returns are delivered as interest, or dividends, or capital appreciation or coupon interest, or a capital gain. Dividends are a type of "return". Interest is a type of "return". That is why we use the term "return on investment" to describe an or all of this.
My net worth ( including my house) is £2.5 milion. I still spend frugally and have to save 40% of my income to ensure my assets are serviced and I' m buffered against future financial shocks.
All those creators talk about LONG TERM… INVESTING, that’s why if you don’t change mindset, investing is not for you…
The point is solid, but too detailed for the average beginner viewer to digest. The simplicity and (baseline) principles Ramit and others are trying to teach make sense and ARE valid. (Even if the specifics are a bit more nuanced)
I don’t think ANYONE questions the fact that your portfolio will grow faster after 100k than it did at 1k. (Assuming equal contributions). “Exploding,”….thats a subjective metric, and a term likely used to generate clicks rather than teach an idea.
It’s took me 1 yr to take £3k to £20k and that’s taking £4250 out after 6 months .
The ‘Gurus’ give you an idea of what’s possible weather their doing it or not . People can do better than their think if their just took action . Your average financial advisor don’t do anything exceptional especially considering it’s suppose to be their job .
You obviously don't listen to Remit on a regular basis. He goes over people's debt and how they should pay them off and not get into more debt with a big car payment etc... Also , if you invest in etfs that pay you dividends and you reinvest those dividends once you reach 100k it would grow alot faster if you continue to invest while reinvesting your dividends.