Hey guys, it's sasha welcome to the video where i'm going to shatter a few dreams and share some unfortunate truths about investing this video is pretty important, so make sure you listen up. The last 12 months has been an absolutely crazy year for investing. We've had bitcoin go up over 10 times to an all-time high. We've had the biggest stock market, bull run in history, with the market growing by 80 percent.

In the year, we've had tech stocks like tesla, getting absolutely crazy returns and then we've had the whole short squeeze sagas with gamestop and amc. It has certainly been a really unusual year for investing, and naturally you drew a lot of people into the investing world for the very first time, and i know that, as a result, some people who have only recently started in their investing journey may have some quite Unrealistic expectations about what investing is about or how it really works long term and we've had a crazy number of new people on tick, tock, giving 20 second investing tips and a new crypto taking off to the moon every single day. If you just invest early enough you're going to become super rich really quickly, i think all of this is really bad for investing. The fact that all of this is happening is really not helping investing to develop as a concept, and a lot of this will come at the expense of a huge number of people losing a lot of money in the process.

So i wanted to just take a step back and share a really important message. Unfortunately, investing will not make you rich now in the way most people think about it. Anyway, investments can be an incredibly powerful tool to help you manage your money over time and to help you extend the wealth that you build, but it won't just go and make you rich out of nowhere. The issue is that the posit that investing can make you rich is not only untrue, but it can also, unfortunately, have the exact opposite effect if you happen to believe it first, let's start with some basic numbers.

If you start with just a hundred dollars and you make 10 return - which, by the way, is a pretty good return, then you're only going to have 110, which is definitely not a way of becoming rich. Even if you make a hundred percent return on your investment. In a year, which is incredibly rare, you're only going to have 200, which is definitely not rich either, and if you catch a lucky streak and you get 100 return every single year for eight years in a row, starting with a hundred dollars. You're only going to be on 25 600 and it's going to take you 14 years to actually reach 1 million dollars by striking it 100 every single time.

So, unfortunately, in order to make millions or billions in investing, you have to earn your millions or earn billions of dollars first somewhere else. A lot of people will go and point famous investors out there who are known for being rich, but even warren buffett himself. Didn't start with a hundred dollars, or even a thousand dollars to make that into his billions, he earned his money through his business and he invested that money as well as using his investors. Money is effective leverage and that's how he got to where he is, but in any case the market tends to grow at roughly nine percent per year or about seven percent.

After you take out inflation and, to be honest, 90 per year is actually really good. For the vast vast majority of people who are investing, this is a great return and i'm going to come back to that in just a minute. But let's just assume that you're going to get nine percent on average in your investing per year every single year. And let's say that you save up over time and that you start with a huge lump sum of twenty thousand dollars, which is quite a big chunk of money.

It's going to take you 46 years at that rate of nine percent in order to hit one million dollars. That's a long time. So, even if you somehow go and spend a huge amount of time during your university years to go and earn that twenty thousand dollars - and you start by investing it at 21 you're only gon na - have your one million dollars when you age 67 and that's assuming That you don't touch any of it before then, and if inflation happens at an average rate of relatively low two percent per year, then that one million dollars in 46 years time is only going to be really worth about 402 000 in today's money. So, although that's really good, it's not the sort of crazy, rich kind of territory that some people perhaps think.

But the fact is that you can get rich by investing more money over time and the way you do it is by saving by putting more money into your investments. As the saying goes, the easiest way to make one million dollars is by starting with a hundred million and, as you add, more money to your pot over time, your investments can really begin adding up the primary driver of that growth. However, despite what everyone really thinks is not your smart investing strategy or not the specific picks that you're making the primary driver is still going to be the amount of money that you're putting into your investments. It's your ability to continue adding to the pot over time on a consistent basis, because here is a staggering fact, despite literally everybody out there on tick, tock blogs and youtube, including my channel talking about specific stocks or particular investing strategies, or some amazing knowledge that nobody Else has the fact remains that 86 of all active equity funds in the us have underperformed the market over the last 20 years and out of those who have tried to beat the large caps, the s p 500 94 have ended up losing over that same 20-year Period and the longer the time horizon, the larger that proportion is, and these are professional investment funds with thousands of the smartest analysts, super computers and whatever else it is that they need.

So although the data is not really available, if 94 of professionals underperform the s p 500, then the likelihood is that pretty much a hundred percent of retail investors will as well in the long term sure some will have a great year and maybe have a huge Result because they got lucky with one stock or one particular asset that they chose to invest in, but they might also get lucky the next year as well, and then people will begin thinking that they're some kind of god's gift to investing. But the truth is, it is incredibly difficult to consistently pick out the winners and, while somebody might do it, somebody out there might go and get it right every single time in the long run. The likelihood is that the vast majority of us will not be that someone. It is easy to be the market genius when the biggest bull run in history happens and everyone's investments grow by a crazy percent, but being able to pick the investment that is about to have the breakout year for 46 years in a row is really really difficult To the point of pretty much being impossible, and it means that you have to spend 46 years constantly analyzing the market, doing the math sifting through companies and trends.

Well, the guy down there, who is doing absolutely nothing and just invest their money in the market, will have a 99 chance of beating you picking out. The winners always looks easy in retrospect, of course, tesla was going to explode in value. We all knew it. That's.

Why we all went and put our money in them and if you went and invested into them at the end of 2019, you will have made just about 2 000 return in about a year. But you could also have invested in tesla in 2013, and your investments would have not grown at all over the following six years and you would have made a big fat zero and you could have at that point after six years of getting absolutely nothing sold. Out of frustration or you could have invested in the dozens upon dozens of other promising losers, who looked just as good as tesla at the point when you were making that investment decision but ended up, not delivering a psychology, makes it incredibly difficult to make rational investing Decisions, even if we consider ourselves to be smart and educated and know a lot about the world of finance and investing we as humans have natural limits and natural traits that limit us. We naturally have a limited capacity to process and focus.

For example, nobody is going to go out there and do proper research and a proper valuation and to build a proper model on each out of 2000 different russell companies to determine which one is the best. Investing pick and then go and do that every single month we also suffer from things like fomo. We are afraid to miss out on the latest trend on the rate of latest company that everyone says is about to explode. Everyone is talking about these picks and we want to be in on the action.

The truth is, even if you know this, even if you know about the fact that you shouldn't go and dump your investments into the latest cool trend, we are all going to be at some point, subject of accidentally or indirectly doing exactly that. We listen to what some random youtuber says about a particular stock and we see thousands of comments that reiterate the same message and we begin suffering from confirmation bias, because you probably went and clicked on that video and watched it because you were already kind of interested In that particular stock - and you probably won't go and watch the other video that somebody else made that talks down the same stock, because we don't like consuming information that we fundamentally don't agree with. We also don't apply mass to our investment decisions, even if we tell ourselves and even if we really think that we're doing so, we will go and sell a stock that has dropped in value, because we are afraid that it will drop even more, and we will Then miss on the big rebound we'll also keep hold of a stock that has grown by a hundred percent, because we are in love with the company and we don't do a proper, unbiased re-evaluation of whether that is still the best place for our money to be. After that, hundred percent has already happened.

Just remember that there will always be somebody out there who will earn more than you will with investing, because there is always somebody who locks out or just makes a better pick, but that doesn't really matter here is a stark truth. Investing is not a competition. You don't need to go and beat everybody else in order to do well, you don't need to beat anybody to do well. All you need to do is to meet your own personal financial goals, your own personal financial objectives.

You are the only one who gets to judge your investing performance and your decisions in the long term, and you only have to satisfy yourself with the decisions that you make. Unfortunately, investing will not make you rich, but it can be an incredibly powerful tool for managing your money. If you like this video, please go and tell youtube by hitting the like button at the bottom. Thank you so much for doing so.

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