a viewer just wrote in and asked this question they said hey just recently my friend said it is
a bad idea to invest in index funds after all they only make about eight or nine percent on average
every year on the other hand they invested and made over 400 on their investment they said as
long as I'm going the route of index funds I'll never actually be rich could this person actually
be right oh it's time to unpack this question and give you some actual facts that you can take away
and I hope you learn a lot from this video so if you're ready to get started hey don't be dumb tap
the thumb on the video Let's Get Right to it so there's a couple things we need to unpack
here this isn't just an easy answer while index funds you know eight to nine percent yeah that
that seems low you should just do their investment strategy because they said they're going to make
400 percent so if that's the case maybe that's the way to go but hold on a minute a lot of times
people will claim that oh I made 400 return I made 10x return I made this or that but if you actually
say a show me the proof and B can you replicate it oftentimes you get nothing in return because they
don't actually have the receipts to prove you of where they're at so that's what we need to
unpack first so first thing I would do is ask your friend okay show me the receipts let's see that
400 return so I did actually ask the viewer okay did you actually ask that question and they said
yes I did and they said how they earned that 400 return is by investing it in ethereum now that's
what's super interesting let's take a look over here on this chart so I have ethereum right here
on Google and it's actually in the five years so that way we can kind of scroll back now let's be
honest if this person would have invested sometime let's say in 2022 there's no way that they could
make a 400 return in fact December 31st 2021 and I scroll to the recording of this video we're down
significantly so how did you make a 400 return well most likely this person started investing
back here maybe even in 2020 so let's go back here to 2020 if you scroll this all the way
up here here you can see okay you could have made one thousand percent return so a 400 percent maybe
they sold right about here in June of 2021. now the question then becomes did you actually sell
for that 400 gain or did you just say I made a 400 return because there's a big difference if
you said you made a 400 return and in the total culture that we're in yeah that might mean that
you held on for all this time which means you might be still up on your money if you had it
back here in 2020 because right now he'd still be up 207 percent but that is a difference of
200 versus 400 percent now if that person did sell their ethereum at that time that we just looked at
then yes they did make a 400 return but that fails Point number two that I made earlier and that is
can you replicate this right now I don't think you can I'm not saying that you can't do that in
the future we could see this you know a year two years or five years from now it could go back up
giving yourself a 400 return but if you're looking to get rich quick that's where people often get
slammed into the wall so let's compare hear the difference between somebody that's touting a 400
return let alone a 20 return compared to index funds which only average about eight or nine
percent there's a couple things you can look at you can look at the fact that we have individual
stocks that you can invest in you can invest in Apple you can invest directly into Google you can
invest into carvana if you wanted to but here's the whole trick behind that you're putting all
your eggs into one basket whereas an index fund is an index of stocks you own a portion of a bunch of
stocks if their stocks fail within the index it basically self-cleanses it drops to the bottom
of the list and it reinvests your money into a better stock automatically without you having
to worry about it now the problem with that is yes typically over the long period of time you
could only see an average return of about eight or nine percent per year but the question would
become do you listen to the guru who says that you're going to get a big return if you invest
in a single stock or a single cryptocurrency or do you set and forget here is exactly what
I do first I do invest in index funds because I figure that's a safe way to do it eight or nine
percent but and there's a big but behind that I do also invest in other alternative Investments
single stocks and even cryptocurrency but a majority of my investments go into index funds
especially dividend paying index funds because that is my Safeguard what I don't want to have
happen is for one of the two scenarios to happen where I invest in something like a single stock
like carvana get ready for this if I would have invested in carvana and put all my money into
carvana because you know I was bullish on carvana back in the day and look where we're at now year
to date down 97 so if you invested in carvana a year ago you're down 97 but even if you look
at the five year you're still down 75 percent on your initial investment from five years ago so I
I don't want to risk that necessarily now the flip side of that is it goes to the moon in the case of
Apple if you would have invested in apple years and years ago you're certainly up on your money
and you're looking darn awesome much better than invest lesson in an index fund but that's the risk
you need to assess so I have my index fund that's my foundational Finance I invest consistently and
most of my income goes into that particular investment vehicle then I have my fund money
and the idea is not to end up with a carvana stock that drops by 97 but hopefully the other
way around maybe I will get a 100 or 400 percent return it's not going to be as glorious as if I
had all my money over there but the risk profile of it could go this way or it could go that way
is something that you also need to think about I always say if you're going to invest in things
like cryptocurrency or speculative stocks single stocks always think about it this way okay if I
invest this money my goal is I want to get rich off of it I want this to go to the moon and I want
to make a ton of money who wouldn't want that right but you have to in the back of your mind
as your principal of investing into those type of Investments say to yourself am I okay losing
all this money but if you can't stomach that at all it might be better just still invested all
into index funds it gets even better though let's actually put this against the portfolio visualizer
and what we're going to do is we're actually going to take this the real way because I'm
not going to sit here and BSU and say well if you would have invested back in 1982 and
you still hold it today you're going to be a millionaire well that is obvious because time
has passed by things have happened over the years but let's be realistic a lot of times
people hear of individual stocks and hype stocks and cryptocurrency and exciting things when it's
at the peak because think about it when adoption starts happening that's when the news gets in on
it that's when all of a sudden you see all the Articles you see the YouTubers talking about it
everything happens all based on the hype but by the time you invest in it when you're hearing
about the hype it's already too late what you want to be is ahead of the game you want to
be consistent on your strategy confident in what you're doing and stay with it for the long period
of time regardless of what's happening in the news you in March of 2021 decided you're going
to get in on GameStop ethereum and you're going to also invest in an index fund such as vo which
tracks the S P 500 Index so you're going to do three different funds now vo is your typical
eight or nine percent Index Fund ethereum is the cryptocurrency and GameStop is the meme hype
stock of 2021 but you didn't get in on it back in 2020 and rode the wave up to the top and became a
millionaire instead you heard everybody talking about it and then at that point you decided I'm
going to invest 200 every single month starting in March of 2021 up until December of 2022 and
that's exactly what you did where would your money stand today so let's take a look between ethereum
vo and GameStop Corporation this is what we got going on your initial balance of one dollar and
then 200 invested every single month between the difference of March 21 and December of 2022 so
you would have put in four thousand two hundred dollars of your own money that's 200 a month over
that period of time so 4200 is what you invested in let's see what your growth looks like well here
we are on ethereum so March 21 you start investing in ethereum today you would have 2736 dollars that
represents a negative return of 4.8 percent you lost money then let's look at GameStop GameStop
again four thousand two hundred dollars because you invested two hundred dollars every single
month so you invested forty two hundred dollars into GameStop and you're left with only three
thousand three three hundred and eighteen dollars again lost some money but let's look at the index
fund now the market itself the entire stock market in 2022 has been on a downtrend right
let's call it a recession if we will because at the end of the day at 19 Downton over the last
year is enough to make all of our stomachs hurt but let's take a look at this so you invested
your forty two hundred dollars and right now you have four thousand four hundred and thirty five
dollars it almost makes you wonder if you got that kind of return in that short a period of
time knowing that over the long term it's going to average eight to nine percent which one is the
better deal see sometimes we just got to remember that even though people laugh at index funds it's
the story of The Tortoise and the hair the hair might make a ton of money right away but if they
don't sell at the exact right time they are going going to also ride the ship all the way back down
to the bottom not only that they're going to eventually be beaten by the tortoise so if you
haven't started investing yet make sure you do in fact weibo is offering a special promotion using
the link down in the description below you can get yourself some free stocks when you sign up and
deposit your first amount for trading check out this video next we'll see you on the next video