The Internet is Full of Hot Takes
The algorithms are pretty much designed for it.
Some of them are great. Others are trash.
Today, I deconstruct 3 money hot takes that are unfortunately, the latter...
#1 "Crypto is guaranteed to make you rich"
In October of 2015, the top 10 crypto currencies had a combined market Cap (or value) of ~$4 Billion.
10 years later, the top 10 Cryptocurrencies have a value of $3.6 Trillion.
That’s a return of 89,000%
It is unbelievable how much money people have made in the last decade on Cryptocurrency.
(And I’m extremely jealous of each of them)
But is it guaranteed to make you a bunch of money?
Despite the value it has created, the potential for that immense reward comes with immense risk.
Crypto could crash or double in the next year and many wouldn’t be surprised either way
Now, if you still want to own crypto, there’s a way to do it safely.
Many investors use the 5% rule.
The 5% rule means none of your individual investments ever make up more than 5% of your total net worth.
That sounds like a lot of work, but an index fund like the S&P 500 automatically spreads your money across 500 companies.
Just remember, all investing involves risk. There are never guarantees.
But that doesn’t mean you should stay on the sidelines forever as we’ll see with #2…
#2 "Don’t Invest Until the Market is Safe Again"
Look at these news headlines:
- “Is it time to evacuate the stock market?”
- “Political Gridlock, Shaky Europe and Volatile markets spook investors.”
- “Stocks are bound for a long-term bear market with vicious cyclical swings”
These quotes all sound recent right?
But all three of these quotes were from 2010-2012 (Forbes, Reuters, Reuters).
Do you want to see what the stock market did for the 10 following years?
S&P 500 2010-2020
Source: MacroTrends |
In those 10 years, it tripled.
Wanting to time the market makes sense in theory.
But in practice, it’s nearly impossible - and many have tried.
The reality is over the long term, the stock market continues to climb despite ups and downs along the way.
Instead of waiting, put a consistent amount into an index fund every month automatically.
Consistent investing is historically a great way to grow your wealth, housing is another one - but it comes with some caveats…
#3 "Buy a House as Soon as Possible"
Housing advice is a prime example of best practices that changed over time.
2010-2020 was among the best times in decades to buy a house. Interest rates were low, supply was relatively high, and the economy had a 10 year bull-run.
Millions of people bought a house during that time and are sitting pretty today.
So naturally, it makes sense that all of them have the perception that buying a house is a MUST for financial freedom.
That doesn’t mean it is.
Housing is a totally different story now.
Interest rates are higher, supply is lower, and wages aren’t keeping up with increased costs.
You still need a place to live, so buying a house is not a bad idea.
But if you’re debating buying from a financial perspective - there are other ways to grow your wealth.
You can pay rent and use the other dollars to invest in the stock market.
Some index funds are specifically tied to real estate so if you really want exposure to real estate - that’s a lower barrier to making it happen.
I get the irony of debunking internet advice with more internet advice
So, next time you hear a hot take, don’t just scroll past. Pause, question it, and make sure it fits in your long-term plan before acting on it.
As always, I’m here if you need a sounding board.
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