Investing in index funds is not going to make you rich I Am sorry, but don't worry because I will tell you what will make you rich instead. In this video, the overwhelming bit of financial advice that you hear over and over is that there is one Surefire way. The magic trick that will get you rich over time. and that way is to go and invest in the index.

Go and invest in index funds consistently. Because investing in index funds religiously every single month means that you avoid all of the traps out there. In the big bad world of investing, we all know that active investors who pick their stocks are extremely likely to underperform the market to underperform the index standard. And pause.

The guys behind the S P 500 produce some interesting stats about actively managed funds. These are the companies whose sole purpose is to beat the market. The entire reason that these funds exist is to let investors get Returns the Beats just shoving the money into the inday eggs and not having to worry about it. And in any given year, about 62 percent of these funds Will underperform the Market which is bad enough.

but it does mean that a whopping 38 beat the market every year. The problem with these fund managers is that the 38 that happens to be the market in any one year is not the same 38 that then goes and beats the market the next year or the year after that. And as time happens, the fund manager who goes and scores a lucky year suddenly becomes very popular. Everyone flocks to their funds, and inevitably the next year or the year after.

The story is a little different and you can see that in the first half of this year, 51 have actively managed funds trying to beat the S P 500 failed to do so. But when you go and start looking at a longer time Horizon the numbers start looking very different. Over the last 20 years, over 95 percent of actively managed funds that tried to beat the index lost about 3. Three quarters of actively managed funds trying to beat the S P 500 don't even survive 20 years, let alone beat the index, which is a bit of a problem.

I Guess eventually investors start looking at the performance numbers and when the numbers underperform the index, which they do for almost every single one of these, if you wait long enough, then nobody wants to invest and half of the actively managed funds change their investing strategy during the 20 years, presumably after doing badly and then trying to reinvent themselves in some shape before collapsing. anyway. so we know that trying to pick stocks is a losing game and almost everyone trying to do it is making mistakes. The dudes whose job it is to look at stocks all day, every day, along with armies of analysts in Wall Street and supercomputers and whatever lose to the market.

So what hope does Schmucks like you and me have? Well, although we all know that we shouldn't pick stocks, you are probably going to go and do it anyway because that's what retail investors do. that's why you watch channel. and YouTube that talks about investing because a real investor is not satisfied with a boring nine to ten percent that the stock market tends to return on average over the long term. No, nine to ten percent is pathetic.

It is ridiculously low. You have to wait eight years to double your money. What kind of an idiot would want to do that? It's just so painstakingly slow. and in the last three years we've had a whole wave of degenerates promote alternative options that do not take 80s to double your money.

No, you can go and invest in the latest fluffy dog token, the latest coin going to the moon, the latest jpeg of a monkey wearing a funny hat. Or you can invest in this thing called the Dodo which pays a modest 131.98 interest per year on your money. You might be a little concerned of course about the fact that the development team behind Dodo is anonymous, but do not worry. the likes of Alameda Research and Binance have apparently invested.

so what could possibly go wrong? It is somewhat poetic that somebody named a crypto paying 132 interest dodo You know, after a that went extinct due to human greed shortly after the European settlers discovered it in Mauritius I think I went a bit of tangent there. The point is, many young investors have only started investing very recently in the last three years. This is when the new cheap investing apps turned up for the first time and became popular. This is when people were sat at home during covert.

This is when it became a popular thing to talk about in regular conversation. and young investors know that earning 10 a year is for old stupid Indians Because real investors make 420 return every year. And so we've had the army of these people going and buying up the Nfts, buying up every wordless crypto token trying to short squeeze AMC and Gme basically trying to get rich quick through one form of degenerate gambling or another, and now all of that crap has gone down the toilet. Worthless Jpegs that sold for hundreds of thousands of dollars? I Know I Can't believe it either turned out to be worthless.

Every crypto pump and dumb has done the dump and is down at zero and all of these young investors are now asking themselves the natural question: what do I do now presumably getting slapped in the face hard and losing all of your money in these scams is getting some of these people to begin thinking that perhaps chasing stupid, unrealistic returns is actually a bad idea because when it stinks and looks like it usually is because it is a turd. And when you do a bit of homework, a lot of advice out there will say that the thing that will make you rich slowly is index Funds. and that is the right choice. Except investing in index funds is not going to make you rich.

Let's say you do the right thing. You go and get a job. You get a family, You buy a house, you have bills to pay, car loans to pay kids to pay for, and after you've paid for all of that mumbo jumbo, you go and take the last 100 of your money every single month and invested in the stock market. If you start doing that at 25, by by the time that you're 60, you're going to have 296 000, which is not a lot of money.

Not exactly something most people will Define as being rich. If you discounted by two and a half percent to account for average rate of inflation over the next 35 years, it will be worth 122 000 in today's money. But let's say you really squeeze your spending. you're gonna stick 200 into your Investments every month.

That is quite a lot for the average person on average wage after taxes and after all the costs, That gets you to 593 000 after 35 years and that is a fair bit more. but you're still not exactly Rich. You'll have spent your entire life saving that money being Frugal and that 593 000 is about 244 000 in today's money. So yeah, it might buy you a cheap fixer up a house in a rural town.

And here is the problem. If you don't have much money to start with, you can pull out all the stops. You can be as Frugal as you you want, But you are kinda screwed because investing in index funds is not some kind of a magic pill and there is a reason why. The reason is that investing is not the same thing as earning money.

And judging from many, many hundreds of comments on my videos, a very large number of people do not really understand this because unfortunately, the only way to get rich is to learn how to earn more money. And investing is not a form of earning money. Those two things are different. Investing is what you do with the money that you have already earned in order to get a return on that money that outpaces inflation and hopefully grows a bit.

And the problem with learning to earn money is that it involves a lot of hard work. It involves time and involves persistence and it involves stamina. It is a lot more difficult to earn a lot of money than to sit there watching videos about which particular stock is going to go to 10x next year. Warren Buffett Did not become Rich through investing I Know it's hard to Fathom He didn't go and deposit ten dollars into an investing account 80 years ago and then invest a hundred dollars every month and make that into a hundred billion dollars.

Now he created a company that uses other people's money, the investors money to take aggressive investing positions, sometimes to acquire entire businesses and he became Rich through running this company. Now don't get me wrong, he's an incredibly talented investor and has many skills that a good investor needs. But he became Rich through earning money. Using those investing skills, he did not become rich through investing itself.

Warren Buffett's salary from Berkshire Hathaway is only a hundred thousand dollars a year and over 99 of his wealth sits in the stock of Berkshire Hathaway The company that he is running same thing goes for YouTubers Like me, all the ones with millions of followers, they will show you a portfolio with 20 million dollars or a house they just bought for two million dollars or whatever. And the reason that they have a portfolio are worth 20 million dollars or a house worth 2 million is because they earned that money on YouTube. It is not because they invested 200 bucks a month wisely and this is not at all knocking on anyone. This is important for you to understand.

It is important to understand the distinction between earning money and investing it. If you want to have an investing portfolio worth a million dollars by the time you're 60, you probably should invest in index funds as opposed to you know, picking stocks or doing some kind of degenerate gambling like what is becoming very popular. But you need to invest 338 dollars a month into those index funds if you get the average rate of return nine percent to get there. And if you want to have 10 million dollars, something many people will probably agree is sort of kind of Rich you will need to invest three thousand, four hundred dollars a month every single month and I am guessing you will not be able to do it off your regular salary.

So here is the unfortunate truth about actually getting rich. You are going to have to to go out and figure how to level up your income instead of playing Xbox in the evening hanging out with your friends all weekend. You might need to go and learn a new skill or two or 10 and start a side hustle or many. And you will need to persevere and learn from your mistakes.

And it's going to be incredibly hard. It's easy to get motivated to start. It's easy to get motivated to do it for a few weeks, but when you've been added for months and it's a cold February morning and it's raining, you might feel a little different and I can tell you because I've done it enough times myself. I've run my own strategy consulting company for many years in London and then in New York I've done side hustles from 5am until 8 A.M Before going to work and then again from 7 00 PM until midnight after work.

It is not easy. It is most definitely not for everyone and that means that most people are not going to be rich. I Know how impossible and you know what that is? Okay, that is how the world works. It is pretty liberating actually when you think about it and figure it out.

But if you do want to be rich, it is not going to be from investing in index funds. It is also not going to be from picking the right jpeg of a monkey wearing a funny hat either. It is going to be from figuring out how to earn substantially more money. and then you can go and stick that money that you earn into an index fund to make it grow as well.

I Do apologize for how stupidly simple this video is, but sometimes I find it useful to have an important reminder of what is important. foreign.