Invest like Skittles

All right, big e-board. Amazing. I think last semester there were like two people on the e-board. Yeah, now there’s eight. Amazing. So the class today is about investing and general financial freedom. We’re going to talk about the stock market, we’re going to talk about some real estate investments, and we’re going to dabble a little bit in the world of crypto, NFTs and stuff like that. And if we have time at the end and you want to learn more, we’ll also talk about credit cards, points, travel, and maybe some student loan stuff. I named it “Invest like Skittles,” and you’ll find out why in a few minutes. So before starting, obviously, a legal disclaimer for the lawyers in the room who are going to law school soon: everything I tell you is from my experience, my personal advice, things that I’ve learned over 20 years and thousands of hours of practicing, trial and error, mistakes and stuff like that. But, you know, do your own

research, of course. Don’t just listen to me because I’m up here on the stage. Everything you do, do your own research, make sure you know what you’re doing, and ask questions. So throughout the presentation, ask as many questions as you want. Just raise your hand; you don’t need to wait till the end. It’ll just be more engaging and informative, so feel free to ask anytime. And I will give you the slides at the end, so feel free to take notes if you want to. There’s going to be a lot that we’re going to cover. So I want to start with this number: 39%. And actually, I’ll back up to a different number. I think there are about 30 million millionaires in the world, but only 1.1% of all adults in the world are millionaires. Only about 1%. But 39% of them live in the United States. So just to start off with, most of you in this room have a massive advantage to becoming millionaires. Number one, because you live in the United States. Number two, you’re at the University of Miami. Number three, you’re listening to speakers and you’re in this club right now. So you have a huge advantage, and I’m going to

teach you a few quick tricks, just simple things you could do today after this class, that will almost guarantee success in becoming a millionaire. Not at a super young age, but over time. It’s all long-term investing. And 57 years old is the average age of most millionaires in the US. I want to start off with this because in today’s generation (and I fall prey to it also) everyone wants to get rich quick. I want to get rich tomorrow; I want to be a millionaire tomorrow. There are no get-rich-quick schemes. It doesn’t exist. I’ve spoken to a few people here. I think it was Kumesh who was saying, “Yeah, I invested in penny stocks and I made some good money, and then I lost it all.” Everyone’s trying to do something fun. Someone also mentioned Dogecoin. So there is a fun bucket that we’ll talk about, but there really are no get-rich-quick schemes, and if there are, they’re usually illegal. So the average age is 57 years old. It doesn’t mean that you won’t hit that earlier; you probably will. But just keep that in mind. So, a quick intro about how

I learned all this. I started investing at about your age, probably a little bit earlier even, and I dabbled in stocks a long time ago. There was no crypto or anything like that back then. Then I got a lot more involved throughout college, and it was really my father who took me on the real estate journey. He was already a big real estate investor his whole life, so he got me involved in the world of real estate. So I tried a lot of things. I literally tried everything in my lifetime that you can imagine. I’ve tried it all, failed at most of them, and learned a lot along the way. But where I learned the most by far was about six years ago, when I was about 30 years old. If you were in the last class, you’ll know that I sold my last company, and I was like, “What do I do with the money? Where do I invest it? Where do I put it?” And like many of you, I had a lot of reservations about the stock market. Is it safe? I’d heard a lot of bad stories, which we’ll cover, and I wasn’t really sure. So what I ended up doing, like I always do, is I went crazy into research. I literally read

hundreds and hundreds of these books up here and did so much research. Thousands of pages of research, every video you can imagine on YouTube, every blog you can imagine, every book you can imagine. And then I tried everything. Over the last probably seven years, I’ve tried a lot of things. And the interesting and fun thing is that everything I’ve learned in thousands of hours of research, I’m going to give you right now in 60 minutes. And it’s really simple when you just distill it. It’s very, very easy and very simple. If you follow one or two things, that’s really it; you can be successful in investing for the rest of your life. Okay? And some of my favorite books, if you want to grab a picture, are these. These are probably my top three favorite investing books, and I have a few copies of one of these out here for everyone. Got it? Cool. So the main goal for me today is to teach you how to become a millionaire for only $3 a day. That’s really all it takes. Just

$3 a day will make you a millionaire over time, thanks to compound interest, which we’ll talk about. It’s very, very simple, and I’m going to get into that towards the end, so you’ve got to stay tuned till the end for that. So I want to start off with a story about my wife, actually. Her name is Elana. When she graduated college, she had her first job at FIU as a pre-lawyer, and they had a 401(k). Does everyone know what a 401(k) is? Some people. Well, we’ll get into it, but it’s a long-term retirement plan. So they offered it to her, and like most companies, they didn’t explain what to do with it. So she just had it. It was automatically invested, doing whatever they wanted. And when I first met her, she told me she had it, so I looked into it and I was like, “Why are you investing in bonds?” We’ll talk about bonds, but they’re pretty much like a savings account. You could almost make more money putting it in a special savings account. “What are you doing?” She said, “I don’t know. No one told me what to do with it.” So when I first met her, the trajectory for her was to make $170,000 by the time

she hit 65 and retired. We made one simple change to the account, and now she’s going to retire with $1.3 million. Just one click. That’s all it took. And that’s what I’m going to teach you today: what that one click is and what you need to do. No one teaches this to you, and I’m just shocked. I don’t know why, but no one teaches it to you. So we’ll get into investing and diversifying, and I love to use the example of Skittles. We’ll talk about why in a second. So this is a picture of only red Skittles. I have my one red Skittle here, and that one red Skittle to me means one investment, one asset class, one stock, for example. And I want to start with a really sad story that really gets to me, which is one of the reasons why I’m up here: to make sure that this never happens to you. I have a really close family member, and about 15 years ago, in 2008, the stock market crashed. The recession of ’08. He was invested with a financial manager. And I think it was Kumesh who

told me, “I don’t know what I’m doing. I’m just going to give my money to someone.” That’s one of the things you have to be very careful about, because that’s what this family member did. He gave his money to someone, a very trustworthy person. I think they were working for a big company you’ve probably heard of. And that person did whatever they wanted, and they make their money even if you lose money. So this family member got wiped out. He lost his life savings, probably over $1 million, and he was in his 50s. Life savings gone overnight. But who made money? The financial advisor, because they’re making money even if you lose money. If they’re trading stocks or doing something like that, they’re making money. Not all financial advisors are bad; I want to start with that. But if you’re ever going to trust someone else with your money, make sure you know what they’re doing. They should have a fiduciary duty to do the right thing for you, you approve every single thing they’re going to do, and you know what they’re doing. You always have to be in control of your money and make sure that you are approving every single decision they make. So that’s

one. The saddest thing is that today, 15 years later, he’s still trying to get himself out of that hole. He used to take his family on vacations, he used to help his kids, and he can’t do any of that. Now he’s maybe in his late 60s and he’s working again, very, very hard, when he should have been retiring. So this story hits very hard for me, and I’m going to teach you why not to do exactly what he did. So the first lesson I’m going to teach you here is: always be in control of your money. And we’re going to talk about that in the context of Skittles. So first, just a quick question: who knows how many colors are in a bag of Skittles? The average bag? Five? Any other guess? Six? Okay, five or six. The answer is five. All right, so you’re the first winner of a tennis ball. See if you can catch that. Good job. I have a few tennis balls. If you engage and answer some good questions, you’ll get some tennis balls, and at the end you

will win a book. I have an investing book for about 10 of you. So there are five colors, and to me every single one of these colors represents a different investment or a different asset class. And the colors teach you to diversify, like the colors of the rainbow, like the colors of Skittles. So when you think about diversifying your investments, there’s a lot that comes to mind. Later on in life (not so much right now, when you have limited money, but later on, when you have a lot more money) you don’t want to put all your Skittles, all your colors, in one basket. So you might do some in US stocks, you might do some in international stocks, you might do some in real estate, some in business, which means your own business or other businesses. And you also have your fun bucket, your high-risk bucket: “I just want to put 5% in Dogecoin or crypto or NFTs or whatever. I’m just going to play.” You can do that too. Okay. Now, the main point of today, though, is to talk about one main thing and one main thing only, and that is index funds, ETFs and

the S&P 500. So who knows what I just said? Okay, a lot of you. Good. Who wants to explain what an index fund is? Kumesh? Awesome. Okay, we’ll give you a ball for that. That’s a good answer. So an index fund is a collection, a group of stocks. You’re not just investing in one stock. If I was investing in just one stock (someone had an example, let’s say Dogecoin) and it’s gone, that one stock failed, it’s gone, I’m wiped out. I have nothing left in my bucket. But if I take all of these colors and put them all in here, that’s the S&P 500 for you: 500 different companies across many different sectors. In the S&P 500 you have tech stocks, financial stocks, healthcare stocks, consumer goods and real estate, and that’s just five of the 20 different

asset classes. So Facebook, Tesla, Amazon, Microsoft, Google: they’re all part of the 500. They’re in the top 10. If one of those companies goes bankrupt, you’re fine. Nothing happens. Just one of those stocks out of 500 is not going to kill me. I might lose 2% that day. Big deal. If the whole tech economy crashed, I’d lose 5%. It’s not a big deal. And that’s the point of diversifying. So for you, the number one thing you’re going to walk away with today is: invest in the S&P 500, because it’s super, super diversified. Okay? So here’s that first lesson: diversify like Skittles. And hopefully whenever you see a Skittle in the future, you’ll think of that. For people who read the Bible, there’s also a quote from the Bible: “Give a portion to seven, or even to eight, because you don’t know what’s going to happen on the earth.” If one thing fails… you know, you don’t want to put all your eggs in one basket. And for the Jews in the audience like myself, it also says in the Talmud: divide your money into three parts. A

third in land, a third in business, and a third in reserves. Reserves means cash, bonds, a savings account, whatever it is, for a rainy-day emergency fund. But this was written thousands of years ago. So today, land is real estate. Business can be your own business, or it can be the S&P 500, because you’re investing in other businesses. And reserves, like we said, is cash or bonds. This is more for later on in your future, when you have a lot more to invest. For today, if you have some money sitting around, the S&P is probably the easiest way to go. Any questions so far on this? Okay, awesome. So I’ll tell some stories for the haters. How many here are, or have been, afraid of investing in the stock market? Okay, awesome. And how many people here know someone, family or friends, who’s lost money in the stock market? Okay, everyone. Awesome. So this is what happens when you don’t

really know 100% what you’re doing, obviously. We are like little pawns in this big game of people, and we’ll talk about who a few of those people are that we’re competing against. But there really are just two simple rules you can follow to practically guarantee you will never, ever lose money. And the next time these haters come to you and say, “You’re investing in the stock market? You’re crazy,” I’m going to give you two questions to ask them, and that will be it. That’s what I’ve learned in my life so far. So this date here: who knows what happened on this date? COVID? The stock market crashed? COVID, exactly. That’s good. Stock market crash. I think you both kind of got that, so I’ll give it to you. Awesome. Good job also with COVID. So this was the lowest day of the stock market crash for COVID. Now, how much do you think it crashed? It’s already on the screen. Damn. Okay, so it crashed by 33% within a

period of a month. So if you were the unluckiest investor in history, meaning that you invested on February 19th, within a month you lost a third of your portfolio. Now, the number is actually worse if you invested in individual stocks, which I’ll show you. Some people lost everything, 100%. Some stocks went bankrupt. But in general, even if you were invested in the S&P 500, you lost 33%, and I’ll tell you why I’m telling you this soon. Now, I have a very good friend in the back, Daniel. Thank you for coming. Not him, but a mutual friend that we know: he was leveraged. I won’t get into what that means, but there’s a lot of fancy things you can do in the stock market. Options, shorts, puts, calls; he can tell you all about that. And you can use margin. Long story short, he was betting three to one in the stock market that it would go up. So if it went up by 10%, he made 30%. So if it went down by 33%, how much did he lose? 99%? 100%? Okay, so he lost

$50,000 in one day. He just got wiped out in one day, overnight. So the point of this is: don’t use leverage, don’t use margin, don’t do anything fancy. Everything is very simple, and I’m just going to give you two rules right here, right now. This is probably the most important slide of this entire deck, and it’s super, super simple. Number one: invest in index funds. That’s it. Specifically the S&P 500. Diversified, easy, will not fail. And when I say will not fail: people ask me, “What if the S&P 500 crashes?” And I say to them, if the top 500 companies in the entire world go bankrupt, I don’t care about my stocks. I can pretty much burn my money. The world is over if the top 500 companies in the world fail. So that’s my mentality on that. So, invest in index funds. And two: hold. The number one problem that I see is people panic and they sell. The market crashed 33%. “Oh no, I’m watching

the news, let me sell, let me get out of here.” Boom, and I sell everything and I take that loss. If people just held on until it went back up, they’d be fine. And I’ll give you an example. March 19th was the lowest day; you lost 33%. If you just held on for one year, you would have made 16%. If you held on for two years, you would have made 30%. Today, you would have doubled your money, 100%. And that’s the worst-case scenario: if you invested at the worst possible time, at the peak, and then it crashed, you still would have been fine. It’s all just time. So the mistake people make the most is they panic and they sell. You never, ever want to do that. So this is exactly a 10-year chart, the last 10 years, and you’ll notice that the crash is barely noticeable over 10 years. Generally the stock market will look like a roller coaster ride, ups and downs, but it’s always going up over the long term, which you can see here. So that crazy crash is just a blip on the screen now as you zoom out. And the same

thing with 2008. Over time it always goes up. All you need to do is just hold. So we already covered this; I won’t cover that. These are some of the top 10 stocks in the S&P 500. A lot of companies you know: Apple, Microsoft, Amazon, Nvidia, Google, et cetera. You’ll notice that 1% or 2% is Facebook. If Facebook goes bankrupt, you just lost one or two percent. Big deal. No big deal. Okay, we got our first question. Yes? Great question. So the question is: do the stocks in the S&P 500 change every year? The way to enter the S&P 500 is based on your market cap and your value, how big you are. So when a company starts doing really, really badly and starts losing value, it will get pulled out of the S&P 500, and the next company will replace it and come into the S&P 500. Tesla is relatively new to the S&P

500, in the last five years, probably even more recent. So they were one of the latest stocks to join the S&P 500, and they got a huge boost. Whenever you join, you get a huge boost; the stock normally goes up, because now everyone’s investing in the S&P, so now they’re technically investing in your company also. Great question. You don’t get a tennis ball because you’re my friend. So we already spoke about this. When people tell you, “You invest in the stock market? Are you crazy? Don’t ever do that,” you have two simple questions for them. Mom, dad, family, friends: “You lost money in stocks?” “Yeah, we did. We lost our life savings.” All right, two questions, that’s it. “Did you invest in the S&P 500?” The answer is usually no. They usually invested in an individual stock here or there, or they had someone doing it and they messed everything up. That’s just one. And number two: “Did you sell when the market crashed?” Actually, 100% of the time the answer is: “No, I didn’t invest in the S&P, and yes, I did sell when the market crashed.” That’s it. It’s very, very simple. Invest in the S&P and hold. That’s

pretty much it. Any questions so far? It’s really simple. Yeah? Great question. So, are there different types of S&P funds? As Kumesh and others reported, there are many. There are a lot of companies you’ve maybe heard of, like Vanguard, or SPY. There are a million different companies; even Schwab has one. They all offer a fund of the S&P 500. They just copy each other; it’s all the same thing. So you can invest in literally any S&P 500 fund, and they’re 100% the same. The only thing that’s different between them is something called the expense ratio: how much they’re going to charge you, what fees they charge you to invest in the S&P 500. Now, lucky for you: back in the day there were mutual funds, which we won’t get into, and it was like 1% fees. You put in $100, they take a dollar a year off you. Now it’s 0.04%. One might be 0.03, one might be

0.05, so you’re talking about pennies now. It really doesn’t matter, honestly. Some are even free right now. Okay, you save three cents a year; it’s not a big deal. So whichever platform you like to invest in (and we’ll talk about platforms) doesn’t really matter. They’re all the same at this point. Awesome, great question. Anything else on that? Yes? So the question is: don’t some funds weight the S&P 500 differently? Great question. If it’s a true S&P 500 fund, they’re literally copying the top 500 companies, word for word, weight for weight. They’re all the same. Where they get weighted differently is if you get specialty funds. One is called QQQ. It’s tech-heavy; it’s like the top 100 tech companies. So it’s mostly tech, like 70% tech, so if tech goes down, you’re probably getting hit harder. So I would just keep things simple. The S&P is probably the way to

go. Yeah, great question. Was there one more? No? Okay, awesome. So, beating the market. What does beating the market mean? What is the market? What does that even mean? When people say, “The market went up today,” or “I’m going to beat the market,” the market pretty much just means the S&P 500, or the Nasdaq, which we won’t get into; they’re just different types of stock markets. But that’s pretty much what it means. Now, to beat the market: that’s your baseline. The market, the S&P 500, generally goes up by about 8% to 10% a year. To you, that might not sound like a lot. “10% a year? I want to double my money in a year.” Where it really gets exciting is when every year it keeps growing 10%, and it compounds and compounds and compounds, and after 10, 20, 30 years it just starts getting crazy, which I’ll show you. So people want to beat the market, meaning, “I don’t want to make 10% a year, I want to make 100% a year, and I’m going to start investing in my own individual stocks. I know Tesla will go up, I know Apple will go up.” Sometimes you get lucky, sometimes you don’t. Over

the long run, you generally will not get lucky. You might have one or two good bets, which we’ll talk about, but long term it’s nearly impossible to beat the market. In fact, what percent of people worldwide beat the market consistently over time, over 20 years? Zero? Now it’s a little bit higher. Two to five? One? Okay. Six? Well, the numbers are different everywhere, but about 6%. Great job. So only 6% of people beat the market. Now, you might be saying, “Okay, there are 30 people in this room; 6% of us will beat the market. I can probably take my chances.” It’s not 6% of us. It’s 6% of the smartest, brightest people in the entire world. People like Ray Dalio. Who knows who that is? Okay, a few hands. He’s from New York, grew up on Long Island, went to school at C.W. Post, if you know what that is. He has an amazing book called Principles, which I’ll bring up on the screen in a second. This is a guy

you’re up against. Ray Dalio is part of that 6%. Warren Buffett is part of that 6%. A guy like this has been doing this for 50 years. He advises the president and the government on fiscal policy, monetary policy, the economy. He has the biggest hedge fund in the world. He has over a hundred of the top quants from MIT, Yale, Stanford. He has algorithms and computer programs worth millions of dollars. That’s who you’re up against. So when you’re trying to do something sneaky, short a stock or do this, he’s betting against you, and he knows a lot more than you. So that’s the 6%. I want to caution you that it’s extremely difficult, if not impossible, for people like us to beat the market. Usually big companies like this are the ones beating the market, and it’s very difficult for them also. Very, very difficult. Even people who do this full-time can’t beat the market. So I’ll end with that here. Here’s a great book, Principles by Ray Dalio. It’s like his life’s work, but it also gives you a glimpse of how he beats the market and the systems and processes he has in place. It’s mind-blowing, and one of my favorite books in general. So I want to talk

about… yeah? [Audience question about investing in a total market index fund.] Great question. So you could also do that. They also have the top companies in the Dow Jones or the Nasdaq, whatever it is, but the S&P is just the standard, safest 500 companies. You could also invest in the total stock market index, thousands of companies, and the returns are very similar to the S&P. Very similar. But every single thing you’re going to see online will compare itself to the S&P. The S&P is the benchmark. It’s like the gold standard. Everyone’s trying to beat it, and almost no one does. Great question. So I was talking to Kumesh about this, because he said, “Yeah, you know, I invested in some penny stocks and I turned $50 into $500.” Wow. And then he thought he had a hot hand, like playing poker, and then he went all in. He put in his life savings. I don’t know, let’s just make up a number: $2,000. And he lost all of it.

Okay. This is typically what happens if you go to a casino. If you’re gambling, playing blackjack, going pro, you get overconfident. You have a few good hot hands and then you eventually lose it all. And this is what’s very dangerous. Especially during COVID, every stock was down, and it was almost impossible to lose money. Everyone had hot hands. Everyone was making money, or what do they call it, diamond hands, on WallStreetBets. Everyone was killing it, and they thought they could keep killing it, and they started making more investments and more bets and more bets, and eventually they lost. So sure, you might get lucky in the short term. You might have a hot hand in the short term. But long term, over 10, 20, 30, 40, 50 years, you have to always be right. You have to always be beating the market, and generally you’re not going to. So that’s just what overconfidence means. Now, Vanguard actually did a study, and they saw that the more people traded, the more they bought and sold, the lower the returns were overall, versus if they just bought the S&P and held. Why? There are a lot of fees sometimes when you buy and sell. You’re also triggering capital gains tax. Every time you buy something and then you sell

something, you have to pay tax on it. So you’re just losing money through all these different things. Just buy and leave it alone. Don’t look at it until you’re 65 and you’ll be fine. I promise you, you’ll be fine. That’s the biggest thing I could tell you. Now, as far as trying to beat the market: so many of these companies (this is an old slide) are already bankrupt. And it’s funny, because on WallStreetBets three years ago, I even almost fell prey to this. They were all saying, and I even had friends saying, “You should buy AMC, BlackBerry, Bed Bath & Beyond, WeWork, GameStop.” And I literally went to my phone last night just to remember what those stocks were. I had them on a little stock tracker, these were the stocks that I had, and I almost fell for the trap. I almost invested. If I had invested in AMC, how much money would I have made in three years? Guesses? Negative. Negative 93%. If I had invested in WeWork, negative 99%. And if I had invested in Bed Bath & Beyond, I would have lost all my money. I

pretty much would have been wiped out. That’s the problem with listening to the internet, listening to the news, listening to friends. No one has a crystal ball. If anyone knew what was really going to happen, they’d be a multi-multi-billionaire. No one knows what’s going to happen. There’s actually a great book called A Random Walk Down Wall Street, where they showed that monkeys randomly choosing stocks did better than professional investors and traders. No one knows what’s happening. No one can ever tell you. So I got lucky; I saved myself. Now, I do want to talk about the fun bucket here, because the long, safe, sustainable, boring way to become a millionaire is what I just told you. That’s it. The S&P 500. But no matter how many times I give this class, the next day it’s, “Oh, did you invest?” “Yeah, I bought some crypto.” I’m like, “What are you doing?” Because people still want to have fun. They still want to try to double their money. They want to be rich tomorrow; they want to be a millionaire tomorrow. So that’s okay, but that’s your fun bucket. 10%. Take a sliver. Take a

piece of the pizza pie, one slice, and put it in that fun bucket. So if you’re going to invest, let’s say, $1,000 tomorrow, take $100 and go have fun with it if you want to. That’s okay. Maybe you’ll do well, maybe not, but that’s totally fine. So that’s what I tell people. Now I want to talk about these three people. Everyone knows who they are, maybe: Kevin O’Leary from Shark Tank, Tom Brady and Shaq. What do all three have in common? Let’s see if you can get this answer. Yes? Wow, very good. Actually a few hands in the audience. See if you can catch this, if I can throw it. Good job. So who knows who this person is? Yes: Sam Bankman-Fried, the founder of the crypto exchange FTX. Now, crypto’s relatively new. I’m not an expert in crypto, but I’ve read a lot about it and learned a lot about it, and the one thing that I can consistently tell you is that most people I’ve ever spoken to have lost money in crypto. When I was doing research for this, there were something like 30 or maybe 100 million millionaires in the

world, and only 32,000 of them were crypto millionaires. It’s very, very hard to be successful in crypto right now, because it’s just a mess. It’s the Wild West. People like this, a 30-year-old, can just do whatever they want and run away with your money. People literally lost $8 billion from FTX. And then there was also the collapse of Terra Luna, a stablecoin: people lost $45 billion in 72 hours. And we were also speaking about NFTs: 95% of all NFTs lost their value. Today they’re worth zero. So if you want to have fun with these things, in my opinion it should go in the fun bucket until proven otherwise. The S&P 500, the stock market, has been running for 100 years. It’s proven. There’s history, and history tends to repeat itself. Okay, so who knows who this person is? Yeah, a few hands, obviously. Who? Warren Buffett, yes. So Warren Buffett is one of the richest people in the world, top five, top 10; it always fluctuates. And he is probably the number one stock investor in the world

of all time. You know, the GOAT of stock market investing. He knows the stock market better than anyone in this world, and he’s made more money than anyone. He’s about 95 years old now, something like that. In his will, his estate and his trust, the instructions that he left for when he dies, for what to do to take care of his family, his wife, whatever, were: put 90% of the money in a low-cost S&P 500 index fund. You can Google this; it’s a real letter from a few years ago. And then he said put 10% in bonds, just have it as savings. 90%. Warren Buffett, the number one investor in the world. And what else did he do? This is actually really cool. It’s going to be hard to read, but he made a 10-year bet with a hedge fund manager. He said, “I bet you that over a 10-year period, a decade, the S&P 500 will beat a collection of hedge funds.” The hedge funds are the best, the biggest in the world, worth trillions of dollars. They know what they’re doing. Why? Because hedge funds have a lot of fees, and you just won’t beat the S&P 500. And he won. I think he gave about $2 million to the

charity of his choice, because he won that bet. So the more I’ve learned, the more I’ve realized it’s just very simple. We get in our own way of success. It’s very, very simple: the S&P, and hold. So if you had questions like, “Okay, great, David, how do I do this? How do I invest?” There are really three ways. It’s exciting that a lot of you already know what these ways are. The first is Robinhood. Everyone’s heard of them, and Robinhood is just an example. It’s a brokerage account. You could open literally any stock market trading account, on E*Trade, on Schwab, literally anywhere. Just open any stock market account. You can go to Robinhood right now and say, “I want to invest in the S&P 500.” They have tons of those funds. So that’s one way. Now, the problem with Robinhood and any of those (they’re called taxable brokerage accounts) is that they charge you a lot of taxes. When you buy, and when you sell and make a profit, you pay taxes on it. Now, there are government

incentives that make sure you don’t pay taxes, and you should take advantage of those. A few of you have that; I’ve spoken to you already. One of them is called the IRA. It stands for individual retirement account, and it’s really meant for your future, for retirement. So with Robinhood you can buy and sell, buy and sell, make the money and put it in your pocket today if you want. The IRA is better for the long term. If you want long-term wealth when you retire, to have millions of dollars when you’re 60 or 65 and never need to work again, that’s what the IRA is for, and that’s what I recommend right now for a lot of you. The reason the IRA is so powerful is because when you’re 60 years old and all of a sudden you pull out $3 million and you live the rest of your life and travel and do whatever you want, it’s tax-free. You pull out, let’s say, $1 million tax-free, versus Robinhood, where you’ll probably pay, who knows what the tax rate will be then, maybe 40%. You just lost almost half your money. So that’s why the IRA is so powerful, and you can do it yourself. We’re going to talk about Betterment and Wealthfront.

Just go to Google, open an IRA for free. There are tons of options, and you can do it yourself. So there were two questions. We’ll go with you first. Yeah, great question: traditional versus Roth IRA. What the heck does that mean? What’s the difference? A Roth IRA means that when you invest the money today, tax comes out of that money today. So let’s say you made $1,000. First they take out tax, so maybe you’re left with $700, and you can put that into the Roth IRA, and it grows tax-free. So when you retire, you have $1 million tax-free in your pocket. That’s the Roth IRA. I personally like the Roth IRA better, because we don’t really know what the tax rate is going to be 50 years from now. It might be a lot higher. And also, you’re 18, 19, 20 right now; your tax rate is probably very low, 15%. When you’re 65, you’re probably going to make a lot more money than you do right now, and it’s probably going to be a lot more expensive for you. So that’s why I like the Roth IRA. Same question? Okay, great. So the Roth IRA is probably the easy way to go right now. I’ll leave it at that.

Then you have a 401(k). Now, a few things about the IRA. Today, in 2023, you can only invest $6,500 a year in your IRA, which is plenty. Every year it goes up; next year it might be $7,000. Good question, I don’t know. But with the 401(k), it is $22,500 a year. So what is the difference? The IRA, anyone can do right now, today, on your phone. Open an IRA, as long as you make money: you work for a company, you get a paycheck and you pay taxes on that paycheck. You can’t just invest in an IRA if you don’t have any taxable income. Yes? Yeah, so my two favorite websites are betterment.com and wealthfront.com, and I’m going to put them up on the screen, literally right there. Betterment or Wealthfront: my two favorites for an IRA,

Roth or traditional, doesn’t really matter. Also for a regular stock market account instead of Robinhood, you could use them too. And both of them also offer a super-high-yield savings account. So if people ask you, “Hey, I just have money sitting around in my checking account. What do I do with it? It’s not making any money, but I don’t want to invest it,” open an account with these guys and transfer the money. It’s free, with unlimited free transfers in and out, and they pay you, right now, 4.8% or 5%. That’s much more than the 0.01% you’re getting in your bank account. The cool thing is it’s also FDIC insured, up to $8 million now. So it’s very, very safe. Yes? Rather than Robinhood? Okay, so, any recommendation for stocks? Once again, I like Wealthfront and Betterment. If you’re just going to do the S&P 500, it’s easy; they can do it for you. They can even automate it for you. It’s called robo-advising. They can even do a more diversified portfolio, even safer if you want. They’re great: just set it and forget it. I love them. If you want to

have fun and start buying individual stocks, any account’s fine. Just search, you know, “open a free stock market trading account with no fees,” and you’ll find tons of them. There are so many. Yeah, great question. Is there one more question here? Okay. So, what is the difference between an IRA and a 401(k)? An IRA you can open yourself right now, as long as you’re making money. A 401(k) you can only open if the company you work for offers it. It’s only a company program, and not all companies offer it. So when you work for a company, one of the first questions you want to ask is, “Do you have a 401(k)?” It’s one of the best benefits you could ever get, and it’s actually the number one best investment you could ever make in your entire life. The 401(k) is always number one on my list. And the reason why: number one, you get the tax benefits, like an IRA, so it’s tax-free when you retire. But number two, 98% of the time your company will match

what you put into that 401(k). Now, what does that mean? Right now, if someone’s in my company, and let’s make the math super easy, let’s say they make, let’s just go with a low number, $10,000 a year… let’s say $100,000, and we’ll match the first 5% of that. That means if they commit to putting 5% of their paycheck automatically in their 401(k), every year they’re going to put $5,000 automatically in their 401(k), and every year we will match that and give them $5,000 also, into their 401(k). It’s free money. Literally free money. It’s the best thing you could ever do. Yeah? Amazing question: is it managed by the company, or do you manage it? The company has a website they use. Every company has a different website to manage the 401(k). Ours is like guideline.com, whatever, it doesn’t really matter. And you go to that website and

you can choose what you want to invest in. Now, most companies will automatically enroll you in a 401(k) when you work there, at about 5% or 6%, which is good for you, and they will automatically put you into some default program. Some put you into good programs, like the S&P 500 or something like that. Some, like my wife’s, put her into bonds, literally doing nothing. So you want to make sure that when you do get a 401(k), you go in and change the allocation if you want to. Why does the company do it? Okay, so first, it is a tax-deductible expense for the company, but they’re not really doing it for that, because they might as well put that money in their pocket; it’s profit for them. It’s a really good benefit when you get to that level of company and you want to offer more benefits: health insurance, paid time off. The 401(k) is one of those big benefits you can offer people. Some companies (not us, but some companies) have a vesting period: “We’ll match your money, but if you leave us, you lose the money. If you leave us after one year, you don’t get any of our match.” So if I had given you $5,000, you’d have to stay for

more than one year to earn it. If you stay more than two years, maybe you earn 50% of that match. So they sort of use it to hold you in the company longer. We don’t do that, but some companies do. Yeah? That depends on Roth or traditional. The 401(k) is also either a traditional 401(k) or a Roth 401(k), so you can select when you go in: “I want it to be a Roth 401(k).” Taxes will come out of my paycheck, and it’s automatically put in. So one of the books that I’m going to give you, if you got a tennis ball, is called, I think, The Automatic Millionaire. And the whole book is: automate it. You just have to automate it. With a 401(k) it’s automatic. With an IRA, my advice is when you set it up, just say, automatically, $3 a day or $100 a month. Just automatically. Don’t even think about it, don’t even look at it. You’ve got a follow-up question? Someone here? Yeah. Okay, yes, Roth again. Yeah. All right, go. [Audience question about whether a part-time job counts.]

Yes, it still applies. It’s that tax year. So in 2023, did you make any money this year in any job that paid you, that you paid tax on? Okay, yeah, great question. And by the way, it doesn’t mean a full-time job. You could also be a freelancer. Where’s… here we go. So let’s say he’s working an event, he’s filming fraternity parties, whatever he’s doing. He’s making money, they’re paying him. He needs to report that to the IRS and pay taxes on it, but he can use that money for the IRA. Yeah? Yes. The 401(k)? Oh, no, sorry: the 401(k) max contribution is $22,500 a year that you can invest in your 401(k). It’s crazy. Yes, the tax? Yep, it does.

All right, great question. So your question is how the taxes come out. Let’s say you earned $1,000; the company paid you $1,000. With a Roth, let’s say you owe 10%, let’s make it low taxes on that. So the company paid you $1,000. The $1,000 doesn’t go into your bank account; $900 goes into your bank account. 10% went to the government, Uncle Sam. That’s Roth. And then after that, let’s say you have $900 left. You take that money and put it in your 401(k), and it grows tax-free. You already paid tax on that money. The government’s saying, “Don’t worry, we’re not going to charge you tax twice. You already paid tax on it. Now it’s going to grow forever, and when you take it out, it’s yours to keep in your pocket.” That’s Roth. Traditional says: the company gave you $1,000, I want to put all $1,000 into the 401(k), don’t take tax out yet. Uncle Sam, when it grows 40 years from now and I take it out, then you charge me tax. But the tax rate will be way higher then, in my

opinion. Great question. Awesome questions, keep them coming. So, when can you take your money out of both? 59 and a half years old is the minimum age you can start taking money out. And I think there’s something called RMD, required minimum distribution. I think it might be at 70 years old; they keep pushing the age. But there will be an age where you must start taking some money out. Yeah? Amazing question: can you do a 401(k) if you already have a business? Okay, wow, now we’re going deep. I like these. So what can you do about a 401(k) for you and your business? First of all, if you have employees, you can open a 401(k) for your employees and give them the benefit, and for yourself. But you have to give the benefit to them. The problem with that is if they don’t take advantage of it and don’t invest in it at all, but you do, you can’t do that. They have to take advantage of it, and there’s a formula for it. So, another example: you want to go all in, “I’m going to put $18,500, $22,000 in the 401(k),” and the employees put in $1,000 a year. Also not

good. It has to be about equal; there are many more rules to that. What you could do is something called a SEP IRA, and there are other IRAs you can do if you have a business, and you can put more away into a SEP IRA. So you can also look into that if you have your own business and want to go over $6,500 a year. There was a question down here? Someone raised their hand? Okay, awesome. Keep them coming; these are great questions. Okay, so where are we? Okay, so these are some examples here. Yep. So, my two rules to investing, very simple. Automate: every day, $3 a day, or every month, $100 a month. Try to automate it as much as you can. Don’t think about it, don’t look at it, just make it automatic. Easy. And don’t look at it. That’s probably the best advice, because when I got my sisters involved (I have three younger sisters) I was like, “Okay, you’re 18. I’m going to open this up for you; you’re going to do this, you’re going to do that.” And even my older sisters: I did it for them, and they’re like, “What are you doing? I lost 10%! Oh my God!” I was

like, “Don’t look at it.” The market will just do this all day. It’s called volatility. Up and down, up and down, like a roller coaster. But over time it will keep going up. Don’t look at it. Don’t look at it. Don’t watch the news, don’t read the news, don’t listen to anyone. It’s all there to scare you. It’s all fear, fear, fear, scare, scare, scare. “The market’s crashing!” And, you know, who cares? I don’t care if the market’s crashing today, because I’m not touching the money today. I’m touching the money 50 years from now. What do I care what’s happening today? Don’t look at it. You’re just going to freak yourself out, and there’s no need to look at it. And remember that graph: the COVID crash, the 2008 crash, the 2000 crash. In the moment it looks crazy, but 10 years from now it looks like nothing, and 50 years from now you’re not even going to pay attention to it. It always just goes up. Is there a question back here? Yeah? Okay, awesome. So that’s it. Now, any guesses how to become a millionaire for $3 a day, now that I’ve explained it? You got it. That’s it. Just simple: $3 a day, S&P 500. That’s pretty much it. Very,

very simple. So this is what the number actually is, and you can go to Google and just type in “Roth IRA calculator” and play with the numbers. What if I put in $10 a day? You can do a 401(k) calculator: what if they match 4%? With a 401(k) calculator, when they match it, these numbers start getting crazy. This might be $3 million if you had a 401(k). It gets crazy. And one slide that I love is called the latte factor. I love asking people this: how much does your coffee really cost you? In our office, a lot of people love lattes, Ilia. So a lot of people in our office spend a lot of money at Starbucks and on coffee. And it doesn’t mean not living life, but just keep in mind: how much does your coffee really cost you? So who drinks Starbucks? There’s a Starbucks on campus for sure. How much are you spending a day on Starbucks? Just shout it out. $6? Okay. Anything else? Anything higher? That’s fair enough, though. Okay, so if you

spent $6 a day at Starbucks, that will cost you $1.8 million in retirement. If you spend $10 a day, it’s $3 million in retirement. So always think about that. But obviously, still enjoy your coffee. If you’re really, really trying to save, just always keep that in mind. That’s the compound effect. Now, this is a very interesting slide. “I’m 18, but I’ll wait a year. I don’t want to do $3 a day right now. I’m going to wait one year.” So I’m only going to invest $1,000 less. I’m not going to invest $100 a month this year; I’ll do it next year. So I’m going to save $1,000 this year. Now, the slide I showed you before showed what you’re going to make, whatever it is. How much do you think you’re going to lose by waiting just one year? And the answer is more than $1,000. $90,000? $300,000? Okay, so everything’s the right answer, because we don’t really know what the stock market is going to look like. I went with a very

conservative number of just 8% growth a year, and that was $37,000 lost just by waiting one year. But if I did 10%, it was $90,000. And it probably will be $90,000, just from waiting one year. And the question is why. There’s something called compounding, and there’s a great book called The Compound Effect. I recommend it for everyone; it’s an awesome book. And Warren Buffett said compounding is one of the wonders of the world. So what does the compound effect mean? Your money doubles every 7 to 10 years. So if you’re 20 now and you’re going to retire at 70, that’s 50 years from now, five decades from now. Your money will probably double six or seven times from now. So if I invested $1,000 today, and I have six decades to go, it’s going to grow. It’s going to double: $2,000 in 10 years, $4,000, $8,000, $16,000, $32,000, $64,000. Every single dollar that you spend today will be worth $64 in

retirement. So a $10 coffee is really a $640 coffee. So think about that. But with the caveat: enjoy your life also. Not everything is about saving for retirement. My accountant said it best. He’s like, “David, enjoy your life now. Don’t worry; when you’re 65, you’ll be fine then, I promise you. Don’t forget to enjoy your life today.” So in the beginning of my life, I put every penny into my 401(k) and IRA. Now I don’t put 100% into it. I also want to enjoy my life right now. I don’t want to wait till I’m 65. Any questions on that? Okay, great. So the next question I get a lot (he told me he was leaving early) is: what if I have a lot of money today, maybe $5,000 or $10,000? Do I put it all in right now? It’s a little scary. That’s called lump-sum investing: all in, right now. Or do I slowly put it in? Or do I wait for a crash and time the market? 85% of the time you cannot time the market. You’re going to be wrong. And also, while

you’re waiting to time the market, the market is just going up most of the time. The majority of the time, the market is going up, so you’re just going to be waiting it out. So the answer, scientifically proven by data, is: invest all of it today. It’s very scary, but invest all of it today. If you have 10 grand sitting around, invest it today, because over time it will go up. Now, this is an interesting number. If you’re 18 years old, all you have to invest right now at 18 (I mean, it’s a lot of money) is $9,300, one time, for the rest of your life. That’s all. You just put it in right now, today, and you’ll get $1 million in retirement, because it grows so much. If you’re 19, 20 or 21, these are the numbers. That’s it, just one time. That’s lump sum. So if you do have money sitting around, you may consider this. If it’s too crazy for you, and it’s a little bit scary, which I know it is, you could always put it in a high-yield savings account, so at least it doesn’t lose money to inflation. Inflation basically is: let’s say you have $1,000. It won’t be worth $1,000 next year. The value… you

won’t be able to buy this can of tennis balls for $5; it will cost you $7 next year. So your money gets devalued. But in a high-yield savings account, like Wealthfront or Betterment, it keeps up with inflation. At least your money isn’t losing value every year. So just don’t keep it in a checking account making zero, unless it’s small money; no big deal. Cool. Is there a question here? Yeah. I was going to bring that up, but it’s a little bit advanced. DCA: dollar cost averaging. There’s a great blog (and I’m going to mention the book here at the very end) that I follow, called Of Dollars and Data. It’s a data scientist who goes through all these scenarios. Should I dollar cost average? Should I lump sum? Should I time the market? He goes through hundreds, thousands of scenarios over the last 100 years, and what he found was that lump sum is the best way to go. If you have the money, go all in. Dollar cost averaging, by the way, means: if you have $1,000, I could put it in right now, today, lump sum, or I could invest $100 a month for the next 10

months until I’ve invested all of it. What he found is that the majority of the time (more than 51% of the time, a lot more than that) the market’s going up. So if you average in over the next 10 months or a year, you’re just averaging in at a higher price and a higher price. Right now the stock might be worth $10, in a month it will be $11, in two months it’ll be $12. So you’re just averaging into a higher price when you could have locked in a lower price today. It won’t always work out like that, but most of the time it will, and that’s what he said. Yeah? Look, right now people always think the market’s going to crash. There’s always economic uncertainty. No one ever knows; there’s no crystal ball. If you watch the news, the market’s always crashing, always. So the funny thing was, during COVID, March was the lowest month in history. And historically it would take years to come back to where it was. In 2008 it took eight years to get back to those levels. It took a long time. So everyone was saying, “Oh, it’s going to be a bear market. It’s going to be down. We’re going to be in a depression, a recession, for the next several

years.” Within three months, the market was at an all-time high. No one could have ever predicted it, and if you were waiting, you would have lost out. So you really just never know. But with that being said, it’s very, very hard, logically and emotionally, to invest a big sum of money in one shot. So personally, I dollar cost averaged in the beginning until I got more comfortable with it, and that’s okay. As long as you’re doing it and automating it, it’s fine. Is there a question? Yeah. The numbers that I showed on the screen, how much you’ll make: that was for an IRA. You have a tax benefit if that was a Roth IRA. Good question. If it was a 401(k), it would be even higher. If it was Robinhood, a taxable account, it would be lower, because you’re paying tax on it. Those were IRA numbers. But you can play; there are so many cool calculators online, and when you start playing with them, it gets fun and crazy. Any questions on that? Okay, so we’re going to cover real estate quickly, because there’s too much to cover, and maybe we’ll invite my

friend Daniel to speak at a class, because that’s literally his specialty. We go back and forth all day on this. I think I asked, maybe it was Kumesh, or maybe someone else, “Do you invest in real estate or something else?” And they said, “No, it’s too hard, it’s too complicated.” And it really is very, very hard if you’re not committing to learning everything and really doing it, going full-time in it, or your family’s in it, or someone can teach you and back you up. It’s very, very hard to learn. So we’re going to talk quickly about active versus passive investing. Active is what I just mentioned: you’re buying properties, you’re financing, you’re renovating, you’re renting, you’re dealing with maintenance. That’s one part. You could be doing ground-up development. You’re actively managing the investment. You’re putting in a lot of time, a lot of hours, a lot of money, and you’re taking a lot of risk. What Daniel will tell you is that if you go all in, and you really do all your hard work, you could make a lot of money. A lot of money. So there is a benefit to doing that. I take the passive approach, because I’ve seen too many people lose money in active. I’ve lost too much money

in active. And unless you really have time to go all in, full-time, and learn from the best, passive is the easiest way to go. Any questions on this real quick? Daniel, did I say it right? So far so good. So I prefer passive. Yeah, go ahead. Exactly. Wow, very good. Nice. Did you get a tennis ball yet? Okay, you get one as well. You asked too many good questions already. All right, so there are a few ways to invest passively. One, which I tested (like I said, I tried everything: how to invest in real estate, I tried this, this and this, I’ve tried it all), this is one of the things I tried, and it’s fun. It’s nice, you learn a little bit, and it grows slowly. It’s fundrise.com. There are many platforms like this; it’s called a crowdfunding real estate platform. I recommend it if you want to dabble and learn a bit. Just throw $100 in there and learn what they do. It’s pretty interesting; it’s a nice platform. It’s easy to invest in real estate, and it’s diversified. They invest

in many different portfolio types with that $100, so if one property crashes, you don’t lose all your money. That’s what’s very good about Fundrise. Those are the pros: it’s very easy, and you can get started today. The cons, however: your money is locked up. You can’t take your money out for six months or a year, and it doesn’t really grow a lot until two or three years into it. So you really cannot touch the money. It’s not liquid, as they say; you can’t get the money out right away. And they charge you a lot of taxes. Generally, if you’re investing like my friend Daniel, there are a lot of tax benefits in real estate investments. A lot. Not with Fundrise. You don’t get any of the tax benefits, so you’re paying full taxes if you sell, which is really, really bad. So that’s one. Second, REITs. The easiest way. I invest in REITs; super, super easy. The one that I invest in personally is by Vanguard. It’s called VNQ, and that’s US REITs. So what the heck is a REIT? Who wants to explain? Yeah, go ahead. Geez, you guys are good. Okay, what

does that mean? A company that buys property, and you buy part of that stock. Okay, good. So a REIT is similar to the S&P 500, but for real estate. In the S&P 500, it’s 500 of the top companies. A REIT fund is many of the top companies doing real estate only. And the cool thing is you can invest in it just like you can in stocks. You can go to Robinhood and buy this on Robinhood right now. You can buy this on Wealthfront. You can buy this anywhere. It’s just a stock, like any other stock, but it’s a collection of stocks. So the pro is that it’s super diversified, Skittles, all the different investment classes, which I’ll show you in a second. That’s the pro. It’s easy to buy, and it’s liquid: you can get your money out tomorrow. You can invest more, you can sell, you can get your money out right away. I love that. The con, however, is that you do pay higher taxes on them. I don’t want to get too technical,

but you get what are called dividends. It pays you dividends. So if it grows by 10% a year, 5% of that they’re paying you as a dividend. They’re giving you money: “We made a lot of money; we’re giving it back to you.” You pay tax on that dividend, a lot of tax. The S&P doesn’t really give you that many dividends; it just grows naturally. So it’s fewer dividends, and there’s less tax on those dividends. Here there’s a lot of tax on the dividends. They’re called non-qualified dividends, if you want to get into it. So that’s why I don’t love REITs, but I still do them myself. If you do want that real estate exposure, that’s a way to get it. Now, REITs are just like the S&P, where they invest in retail, office spaces, hotels, storage, data centers. So once again, if all the hotel REITs went bankrupt because no one’s staying in hotels (it was COVID, right?) and all those REITs are gone, you’re still fine. You lost 5% of your value. Big deal. If one thing failed, it doesn’t really matter; you’re still diversified a lot, which is a really good reason to have REITs. One of the reasons I don’t like active real estate

investments is because usually you’re putting your life savings, 50 grand, into one property, and if something goes wrong, you just lost your life savings on one property. It’s not diversified. Is there a question? Yeah. So that’s REITs. Now, on fundrise.com they compare their returns to REITs and to the S&P 500, and these are the returns. Fundrise does better some years, does worse some years; REITs do better some years. But the one that does the best over time is still the S&P 500. It’s still beating everyone. REITs are very similar, though. Long term, over 50 years, REITs have a very, very similar return to the S&P 500, but you’re paying more taxes, so the S&P will still come out ahead. But if you want to put a few percent, or whatever, in REITs, that’s also fine. I do that as well. It just gives you more diversification. So the general idea with diversifying is that if the stock market crashed, your real estate investments would not crash. They’re not

correlated. What I’ve learned is that even though they’re not supposed to be correlated, they usually are. In 2008 the whole world crashed from the mortgage crisis: real estate crashed, and the stock market also crashed. In COVID, the stock market crashed, and real estate also crashed. They’re not supposed to, but a lot of times they do. But that’s okay, because eventually they’ll just keep coming back. So we’re getting to the very end. This is one of my last slides, and it’s a very personal slide to me, because this is a family very close to me, and I know one or two people like this. To me, the title of this slide is “the richest poor person I know.” I know a few people like this who are the richest poor people. What does that mean? On paper, they’re worth millions of dollars, meaning they have real estate investments that are worth millions of dollars. But in reality they’re poor. They have no money. All their money is locked up, tied away in an investment they can’t touch. And now they’re 60, 70, 80 years old and they want that money. They want to enjoy it. They

want to travel, and they can’t. They’re living paycheck to paycheck. They still have to work, like everyone else. Even though they might have $10 million (let’s go crazy) they’re still watching what they eat at a restaurant or what they buy, because it’s not liquid. They can’t get that money out. And it kills me, because these people should be enjoying the last years of their life, and instead they worked their whole life to save it and they can’t touch it. So the biggest lesson I have for you at the very end is: stay liquid. Make sure you can control your money. Make sure you can sell it anytime you want and get the money out anytime you want, especially in your older years. Otherwise, what’s the point? If you have $30 million and you’re 80 years old but you can’t touch it and you have nothing, what’s the point of it? So that’s why I love staying liquid. REITs, the S&P, anything like that: you can buy, you can sell, you can get the money today. I can get all my money out today if I want to. So it’s very, very important: don’t keep your money locked up. So my all-time favorite book on investing is this one. I definitely recommend taking a picture of it. And this guy is also the author of that blog

that I follow, Of Dollars and Data. It’s just an awesome, well-rounded financial advice book. You got it? So, some final thoughts. Oh, I will leave you with this one last thing. Every month, I send a super crazy insider stock tip to a bunch of friends. If you want, you can go to [my website], subscribe, and I will send you that one special stock tip a month that has made me and my friends a lot of money. Okay, so [my website], at the very bottom; you can subscribe right now. I want you to stop taking a picture of that, because that was a trick. You’re not supposed to subscribe. It’s totally fake; I made that up. What I just did there is what a lot of people are going to do to you, and it’s hard to call out, because you were taking a picture. But it’s what a lot of people are going to do to you in your life: “I have this insider tip, this trade. Sign up for my newsletter. I made millions of dollars. Look at my testimonials. Look how much money I made for people.” Garbage. It’s all garbage. No

one has a crystal ball. They wouldn’t be selling you a subscription for $20 a month if they knew everything happening in the stock market. Also, a lot of these websites exist that say, “Since February 7th, 2006” (they cherry-picked the perfect date) “we beat the stock market by 3,000%.” Whatever. That’s assuming you were invested for the last 17 years from that exact date they cherry-picked, and that you bought and sold every single one of their thousand recommendations. No one’s doing that. And lastly, by the time they email their subscribers the tip, it’s already out there. It’s public. Everyone already knows. It’s too late; the game is over already. So don’t listen to anyone. Don’t get sucked into these tricks just because someone’s standing on a stage telling you what to do. Don’t trust anyone. This is your money; guard it with your life. You worked very hard for it. Only trust yourself. Even me: do your own research after this. Don’t just listen to someone up here. Do your own research on everything. So, some action items.

Just two, really. If you’re going to move forward with this, open a Robinhood account, or a Betterment or Wealthfront IRA account, and just invest automatically, whatever you can. It doesn’t need to be big or small, just whatever you can. Just get started. That’s probably the biggest thing I could tell you. Even if it’s $5 a month, it doesn’t matter. It will grow; it will compound. And if you want to have some fun, go to Google and type in “IRA calculator” or “stock calculator,” and you’ll be like, “Oh, if I do $3 a day, how much is it? If it’s $4 a day, how much will it be?” It’s really fun to start playing with these calculators, because you can see what you’re going to have in retirement. And don’t listen to the news, obviously. Again: trust your plan, stick to the plan, invest automatically, don’t look at it, don’t sell, play the long game, and always remember: invest like Skittles. Thank you. So, a few things. We’re going to open up for questions, but I think we’ve got office hours next week? Yes?

Okay, so I think Sam and everyone will send you an email. We’re going to offer office hours next Wednesday night at 9:30 p.m. We’ll probably be on Zoom. Just come in and ask any questions you want on any of this stuff. It could be stock-related, it could be investments, it could be anything you want, or business, startups, entrepreneurship, whatever you want. We’ll do that. You don’t need to wait till then if you have questions. I’m going to put my contact information on the screen. Email me anytime; we can even set up a call, whatever you want. I’m always happy to help and to give back whatever I can. And we have a few tennis balls left, so maybe we’ll do a quick little final raffle and then we’ll open up for questions. So this is an easy question. Okay, this is also an easy question. Anything harder? Let’s go with this one, for people who didn’t know it before they came into this class: anyone, the difference between an IRA and a 401(k)? Yeah? Yep. Yes. Awesome, great job. Okay, this one’s going to be tough; hopefully you get it. All right, awesome. Okay, and if you had

the choice and you could have done any of these things right now, which one’s the best? Who hasn’t won a tennis ball? You haven’t won a ball yet? All right, go ahead. Yeah, the 401(k). Why? Exactly: free money. The company is just giving you free money. Take the money and run. Okay, we’ve got one left. That’s an easy one. Let’s go with this last question: the two rules to investing? Yep: buy the S&P and hold. Yeah, that’s it. Awesome job. All right, we will open up for questions. Also, this is the link to download this presentation if you want it, and I’ll put my email up in a second. Yes? [Audience question: when you retire, do you recommend liquidating everything all at once, or taking it out slowly?] Great question. Wow. So when it comes time to retire, at 59 and a half or 65 or whenever you want, should you liquidate and sell everything, or should you do it slowly? It

depends what you want to do in retirement. If you want to start going crazy, you could obviously sell everything, but generally you probably won’t do that. There’s something called the 4% rule, and the 4% rule states that you should sell 4% of your account every year in retirement. So if you have $1 million in the account, you sell 4% a year, which is $40,000 a year, and you live off that $40,000. That’s generally a safe rule, because if you’re 65, you might live till 85 or 95, so you still need money. You can’t just sell everything and go crazy, because you won’t have any money left two years from now. So the 4% rule is like a standard rule across the board. Yeah. One more thing: the S&P is volatile, ups and downs, ups and downs, but long term it’s great, for 40 or 50 years. But when you’re 60 or 65 years old and you need that money now, you actually need it, you will stop investing in the S&P and start moving some of that money into bonds, which are safer, like a savings account. Because let’s say you’re 68 years old and all of a sudden the market crashes and drops by 33%. You don’t have 10 years to wait it out anymore for it to

go back up. You want the money now. So eventually, at that age, you’ll start moving it into bonds, something safer. Yes? Why? Okay: why sell, and not live off the interest? The interest won’t be that high. Usually the interest in the S&P 500 is dividends, and that’s 2% a year. So 2% a year might give you $20,000 a year, and you can sell 4% comfortably and be fine. Yeah, you are selling the dividends: you’re selling all your dividends, 2%, and you’re selling another 2% of the growth. Yep. Yeah, so, opinions on options? Anything complicated, there’s no need to do. There’s just no need. Options, margin, leverage, shorts, puts, calls. You could ask Daniel at the end; he’s tried them all, done them all, and he’s done pretty well sometimes. But over time, over 50 years, you’re not going to beat the market. Once again, you might get lucky here and there, but over time it’s very hard to beat the market. Now, the problem with trying to do all these fun strategies is, “I made some money, and I sold, and I cashed

out.” You just paid tax on that money, and now that money is sitting on the sidelines for months, waiting to do something else. While that money is sitting on the sidelines, the S&P is growing and you’re missing out on the growth. That’s also the problem when you have money just sitting forever on the sidelines: you’re missing out, missing out, missing out. With the S&P it’s automated. You don’t even worry about it; it’s growing more than you ever thought. Yeah, a question in the back? No? Okay. Yeah: is there a benefit to having a savings account if you could open a Roth IRA? Yes, because you also need money to live and survive. You can’t just put everything in. Maybe you want to keep $1,000 in your savings account for an emergency or anything like that. Also keep in mind, with an IRA and a 401(k), you can’t sell. You can’t get out of that investment until you’re 60 years old. Well, you can, but you pay penalties. I think the penalty is 10%, which isn’t the end of the world if you take it out. Or you could take out

what you put in, but you can’t take out the growth. There are other things I really want to mention, like you could take it out for an emergency, but you really shouldn’t. If you’re committing to investing in the IRA or 401(k), the money’s gone in your head. It’s gone. Never touch it. Don’t cash out, don’t do anything with it; leave it alone until you’re 65. A lot of people that I spoke to, when they joined our company, I asked them, “Have you ever had a 401(k)?” “Yeah, yeah, but I cashed it out.” “Why?” “I don’t know.” I was like, “What? The whole point was to let it keep growing till 65.” That’s the whole point of the investment. Don’t touch it. The money’s gone in your head, basically. But yeah, if you need some money to survive and live, put that in Wealthfront or Betterment, a high-yield savings account. Yeah? Question? [Audience question about short-term versus long-term investments.] Yep, so this is like a financial

management question: what are some investments you can do in the short term versus the long term? I’ll just put up one more thing here. This is my email; seriously, email me anytime. So when people need the money in the short term, meaning they want to buy a house, they need to start a family, whatever it is, like, “Hey, I need to save for a down payment on a house. I need 50 grand, 100 grand in the next five years,” you probably should not invest that in the S&P, because it could crash. It will go back up, but maybe you want to buy the house now. You don’t want to wait a year, six years, three months for the market to go back up. So generally, if you need the money in the next three years, just put it in a savings account. That’s it. There are other things, like a CD, a certificate of deposit, but really these savings accounts are paying 5%. It’s amazing. Just throw it in there. It’s safe, and you can access it whenever you want. And then if you want to have some fun, 10%, just go have some fun, you know?

Yeah? What market conditions would force you to sell your whole portfolio? None. You never need to sell. That’s the idea. There should never be a time that you sell, ever. The S&P 500 crashed 33% in 2020. I think it was 48% in 2008. In 2000 it also crashed about 50%. But if you had just held, you would have doubled, tripled, quadrupled your money by now. So you never, ever need to sell the S&P. That’s the idea: hold. If you sell, you lose. That’s it, game over, you lost. But if you hold: one year, 16%; two years, 30%. Just hold. You don’t need the money now anyway, right? The money’s for when you’re 65 years old. So why sell? Just let it keep growing. Yeah. Was there a question back here? Yeah. [Audience question about crypto.] Yeah, I

know. Yes, yes, yes, yes. But there are so many people… there’s another one, HEX. What’s this guy’s name? Richard Heart. Another guy, another Sam Bankman-Fried. And my brother-in-law: “Oh, Richard Heart, he did this, he did that, and this is backed by this, and it’s backed by that, and there’s an algorithm, there’s a function to it, and there’s going to be a sacrifice coming soon.” I’m like, “The only sacrifice is you.” “Yeah, but the money…” I was like, “All right, when is it going to be launched?” “Oh no, he’s holding it until the right market conditions.” I’m like, “All right.” Two years go by. “When are you going…?” “Oh no, it’s going to grow by 5,000%, you’re going to see.” Two years later. Meanwhile, this guy made all the money. He’s been making billions of dollars off your money. It finally launched. I was like, “So how much did you make?” “No, it’s down 5% today.” I was like, “What? After two years?” And then six months later, I asked him last week, “How did it do?” “No, we’re down

like 30% now.” Like, great. It’s so unregulated, it’s so crazy. But it’s fun. It’s the Wild West right now. It’s fun; some people do well, and there are some crazy stories. But it’s risky, right? It’s risky. There are also a lot of scams. Yeah, yeah. People can also steal your crypto, or you give out your password by accident. There are so many ways. It’s so dangerous; just be very, very careful. I don’t know if you want to get into student loans. I have one slide on this; I could just throw it up here quickly. For those of you who have student loans, the only advice I would give you is, when it comes time to pay them off, pay off the highest-interest loans first. A lot of you might have seven different loans: one is 1%, one is 8%, one is 14%. And what a lot of you will typically do is pay the minimums on each one. Instead of paying extra on all of them, only pay down the one with the highest interest rate, the one that’s costing you the most money. If it’s 14%, get rid

of that one first, then the next one, then the next one. That’s pretty much the only advice I have on that one. Credit cards: there’s so much talk about credit cards. Do you care about credit cards, or anything now? Yeah? Yes? Okay, I’ll fly through this in three minutes. Stop me if you have questions, but it’s really quick. Who here has a credit card? Oh, geez. Okay, awesome, so I don’t really need to talk about that. Well, the first thing is: why build credit? Why have a credit card in general? In general, you want to have credit because when you’re making big life purchases, which is typically buying a car, leasing a car, buying a house, you’re going to get a really big loan, a mortgage, whatever it is, for $50,000 or $500,000, and they’re going to charge you interest, 4%, 5%, 6%, based on your credit score. So if you have the best credit score, 800, you’re super safe, and they’re going to charge you a lower interest rate, which adds up to a lot less money over time. So I have a little chart here. It’s a very ugly chart, but if you have the best credit score,

you’re getting, let’s say (this is an old chart) 5.5%. And if you’re buying a house, that’s $850 a month, compared to someone paying $1,200 a month for the same mortgage, the same car payment. So if you’re taking a $100,000 loan, it might cost you $110,000 over 10 years, or it might cost you $200,000 over 10 years, depending on your credit score. That’s why credit is so important. Now, it’s very easy to build credit. Super, super easy. You just need to open a credit card, basically, which all of you have already, and you just need to put a dollar a month on it, even a penny a month, because all the credit bureaus report, if you’ve ever looked at your credit score, is: did they pay their bill in full and on time? Check. It doesn’t matter if it was a dollar a month or a million dollars a month. Did they pay their bill? Check or X. That’s it. So what I tell people is: just open a credit card, find some service, Netflix, whatever, and just put it on there. And if you’re not using credit cards for anything else, just lock

the credit card away. Throw it away, it doesn’t even matter. Just put it on autopay, and that will build your credit. That’s the easiest thing you can do. Yeah? Okay, I’m going to talk about that. Yeah, great question. So that’s the easiest thing. Now, you should never, ever get a credit card if you’re not good at managing money. If you’re not going to pay it off in full… You should treat it like a debit card. You should never buy anything that you cannot afford, and that’s where you’ll get into trouble: “Oh, I’ll pay it off in two years. Oh, there’s zero interest now.” Do not do that. If you’re spending $500 this month on a credit card, pay it off in full right away. That’s very important. And this is a really good tip for everyone who has a credit card right now: just go to your Chase, Bank of America, whatever credit card you have, and send them a message. You can do it online. Say, “Hey, can I please get a credit increase on my credit card?” So your credit limit might be $1,000: “Hey, can I please get a credit increase to $3,000?” And what a lot of them are going to do is either deny you, or say, “Yeah, sure, no problem,” or “We’ll meet you

in the middle at $2,000.” And the question is: why do you do this? Did I have a slide on this? I do have a slide on this. Let’s just bring it up real quick and then we’ll go backwards. Nope, not this one. This one. So these are the factors that affect your credit score. Where is it? 30%. 30% of your score (it’s a very ugly slide) is your credit utilization. Let me just go black for a second so you don’t read this forever. What that means is if you have a $1,000 credit limit and you’re spending $700 a month on it, your ratio is 70/30. You’re using 70% of your available credit, which is not good, because then they’ll say, “Oh, you’re maxing out your credit cards. You have no more room. You’re using all of it. You’re probably not that safe of a person for us to give a loan.” So let’s say you’re still

spending the same $700, but now your credit limit is $3,000 or $2,000. Now your utilization is about 20% or 30%, just by getting the increase, if you’re spending the same amount of money. So the more credit limit you have, the lower your utilization, and the less it will affect you. So that’s the 30%. 35% is payment history. Pay your bills on time, every time. Never miss a payment. I think you get about one time where you can miss a payment, but that’s it. Pay everything, every single time. Then credit history: how long you’ve had your accounts. One of the things I’ll mention here: never, ever close an old credit card. Ever. If you don’t want to use it anymore, cut it, throw it out, lock it, but never get rid of it. And the reason why is that it changes the average age of your accounts. They want to see how long you’ve had credit. If you opened your credit card at 18 and now you’re 28, you’ve had credit for 10 years; the average age of your credit cards is 10 years. Once you open a second

credit card at 28, 10 years later, your average credit age is five years. But if you close that first credit card, it’s zero years now, or one year. So never close old credit cards. Just lock them, but don’t close them. That’s pretty much it on that. Now, favorite cards. I love this one; it sits in my wallet. I like Chase in general. I have the Chase Freedom. It’s a free card, and it gives me 1.5% cash back on everything. I also like the Chase Sapphire Preferred or Sapphire Reserve. The Preferred is $95 a year, maybe $150 now, and the Reserve is like $550, but there are a lot of benefits with it. Those are two great cards; you get a lot of points, but I will give you a trick soon. This is also a great card everyone should get: the Amazon card, because it’s free. It’s by Chase, and it gives you 5% cash back on every purchase on Amazon, which is a lot. 5% is a lot. I’m getting 1.5% on this card; 5% is crazy. And also 5%

back at Whole Foods. Also, if you shop at Target, there’s a Target card for 5%. So a question that might come up is: “But aren’t more accounts and more credit cards bad?” No. Actually, the answer is no. Back to that slide here: they want to see how many types of credit you have, how many different credit cards you have. The more the better, actually. “Oh, you can manage six different credit cards and you’re paying them all off? Oh, you’re really trustworthy.” More credit cards are actually sometimes better, also because you have more credit. Instead of having one card with $1,000, you have five cards with $5,000. You have a lot of credit available and you’re not even using it. That’s great. So it’s okay to have more credit cards. I had 13 at one point. Okay, now some tactics. This is a big one that I use with my wife a lot: open cards that have high bonuses. The Chase Sapphire Preferred, Reserve, whatever: if you open a card today and you spend $3,000 in your first four

months, they’ll give you 60,000 bonus points. That’s a lot. It would take you a long time to get those points otherwise. So what I did was open 10 cards (I don’t always recommend this), and I got 60,000 points, and 60,000, and 70,000, and I had 1 million points all of a sudden. And 1 million points was worth $12,000 to $15,000 in travel. I’ve been traveling the world for free for like seven years already, just from credit cards. Also, I would open a card with 60,000 points and then refer, let’s say you have a boyfriend, girlfriend, partner, spouse, whatever. I’d refer my wife. Because I referred her, I got 10,000 points, and then she got 60,000 points for opening a card. And you can start doing all these games, and all of a sudden we have millions of points, just from these little tricks. And it’s totally legal, totally secure. You can do this; everyone does it, in fact. So that’s what I did. And you can refer people. Yeah. Okay, and then getting the perfect credit score, once again, is just simple: pay your cards off, never close your old cards, never miss a payment. And that’s

it. Any questions on that? Yeah? [Audience question: does getting denied a credit limit increase hurt your score?] If you get denied on the credit limit? No, it does not affect it. There is a hard check and a soft check, but it doesn’t really matter right now. You’re not buying a car today, you’re not buying a house. You can do these sorts of checks and it doesn’t really matter. Also, tracking your credit score doesn’t affect your credit score. Credit Karma is free; you can sign up and check your score every single day if you want to. And generally now they’re getting better with it. If you’re leasing a car, they know that you’re trying to lease a car, so you might go to five dealerships and they’re all pulling your credit, five hard checks, but they’re grouping it now, from what I understand. They know you’re getting a car; it’s going to be one check. Fine. But you really don’t need to worry about these things until you’re getting ready to buy a car or a house, which is years away for most of you. So what I normally do, when I know I’m going to buy a car or a house: I make sure there are no hard credit checks, and I make sure I pay all my cards off in full all the time. And you can literally flip your credit score in a month. I went from a 670 to a

770 in one month, just because before, I wouldn’t care about paying off my credit cards right away. They were always paid off at the end of the month, automatically. But let’s say you have a $1,000 credit limit and you spent $800 on that credit card. They report to the agency twice a month how much you spent, and they’re saying, “Oh, he spent 80% of his credit limit.” But if I spent $700 and the next day I paid it off, they report zero. So it’s as if I never spent anything. That’s a little trick when you want to boost your credit score overnight: just pay everything off right away, all the time. That’s a super easy trick. Yeah, is there a question here? Yep. It does, it does. But you don’t need to do it right now, unless you’re really actually buying something big or getting a loan. I wouldn’t go crazy now. Let’s say in four years: “Okay, now I’m going to buy a car.” Then do that, and that’s it. In a month it will flip right away.

Yeah? [Audience question about moving a balance to a new card.] Oh gosh, maybe. I don’t know, maybe. Everything’s possible. But what I don’t recommend is racking up a credit card bill, then getting another credit card with zero interest on transfers, and then just continuing to transfer your debt because you can’t afford to pay it off. No. If you have a credit card, pay it off, or don’t get a credit card. It’s not worth it. You’ll get yourself into so much trouble with stuff like that. Yeah. Okay, I think we are good. For those who want a tennis ball, come up. Thank you again, everyone. Thank you. [Applause]