It’s one of the most frustrating secrets in personal finance: the returns that mutual funds advertise are almost never what their investors actually earn. It sounds unbelievable, but even industry insiders like Fidelity's Peter Lynch and Mad Money's James Cramer have acknowledged the issue. While most people know that actively managed funds often struggle to beat a simple S&P 500 index fund, the reality is even harsher.
When you think about making money in the stock market, you probably picture buying a stock and selling it later for a higher price. But what if I told you that’s only half the story? For anyone serious about , especially those just getting started, understanding the other half is crucial.
How do you get ahead in the world of investing? The answer is surprisingly simple: buy a slice of every business in the United States and then just hold on to it. This straightforward concept is the key to winning a game that most other investors are almost guaranteed to lose. For anyone exploring , it’s important not to mistake simplicity for a lack of sophistication. It’s a principle that has stood the test of time.
There's a fundamental truth at the heart of that many people miss, but it's the key to long-term success. Warren Buffett put it best when he explained that what owners can earn, in total, is limited to what their businesses earn in total. Think about it: over time, the combined gains of a company's shareholders can't magically exceed the actual business gains of the company itself.
Building real wealth, especially when you’re in your 20s and 30s, is less about a secret formula and more about your mindset. The entire journey of personal finance is built on a foundation of how you think about money. It’s about understanding the psychology behind wealth, building solid habits, learning from the right people, and connecting with others who can help you grow.
My day job is all about taking risks. As a venture capitalist at my firm, Social Leverage, my partners and I invest in seed-stage software companies, with my personal focus being on financial technology. You might recognize some of our early investments, like Robinhood, eToro, and Ycharts. This background, along with co-founding StockTwits, probably makes it clear why I favor individual stocks over index funds when it comes to .
After spending my career in behavioral finance, I’ve learned that how I invest my own money is either incredibly straightforward or deeply complex, depending on how you look at it. But my entire approach starts with a single idea: money is always a servant, never a master. For anyone wondering , I believe the first step is to ask a more fundamental question: why are you even saving in the first place?
I’m a dividend income investor—personally and professionally. It’s a simple philosophy: what I buy for my clients, I buy for myself. My approach to is built entirely around this principle. Now, I’ll admit I have a rogue position in Facebook that I picked up back in 2012 and maybe a few shares of Twitter from 2015 after hearing a compelling case from Bill Miller. But that’s where my dalliance with growth stocks ends.
A few years ago at a conference, a speaker asked the audience, “What is your first memory of money?” I drew a blank. The question is important because our earliest experiences with money form deep-seated beliefs, or “money scripts,” that guide our financial lives without us even realizing it.