Ramit Sethi gives three concrete moves for uncertain times: build cash reserves, diversify your assets instead of picking individual stocks, and stop blaming the macro economy. FDIC covers deposits up to $100,000 and SIPC covers brokerage accounts up to $500,000.
Hey guys, it's Ramit from I Will Teach to Be Rich. This is my first time doing video for the site, so I hope you will cut me a little slack Today. I want to talk about three things. I want to answer some of the questions that you had in the comments regarding what's going on with the economy. I want to talk about asking the right questions and then I want to talk about what you can do with your money to stay protected and even to get ahead. So the first thing is I took a look at the questions and they are all over the map. There are questions about why is the government bailing out private companies with my money. Which political party is responsible for this problem? Who can I blame? Is a really common question I have right now at about 8:30 in the morning. I've got over 40 questions on the blog post and over 100 emails in my box. So the questions are all over the map. And you know what? I think most of them are totally irrelevant. They're asking questions about fiscal policy, tax policy, macroeconomics that is only tangentially related to your money. So what I want to do today is talk about the questions that really make sense for you to ask. Now let's talk about what we know. We know that the stock market itself has dropped quite a bit. So that's important to know. What we also know is that your money is safe, generally. So if you have money in a savings account, even if the bank closes, your money is protected by the FDIC, and that's protected up to $100,000. If you, if your money is in a brokerage account, even at Bear Stearns or Lehman Brothers, if your money is invested at a brokerage account, it's protected by the SIPC up to $500,000. Now there's some nuance to that, so I'll add a link below. Now, if you had invested in particular stocks like Lehman Brothers, well then your money is pretty much out of luck. And that's why individual investors shouldn't be investing in individual stocks. We'll get back to that. Here's the thing. We tend to misjudge risk. So right now we're looking and saying, oh my God, should I pull out? If the fear is really that you're not going to have enough money, the odds are way better that you're not going to have enough money because you didn't save rather than you're not going to have enough money because you lost it all in one fell swoop. Most people don't have enough money because they didn't save enough, not because they lost it all in the stock market. So what can you do with your money? The first thing you can do is save more. Stop spending money on stupid stuff and save more, because the people with cash are going to be the ones who can ride out the storm. The second thing is tweak your asset allocation. As we know, over 90% of your returns come from your asset allocation, not from picking individual stocks. They come from your asset allocation. That is the mix of different funds you have in your portfolio. So I'm going to add a link to that as well, because that's probably one of the most important things you can do today. The third thing is stop asking stupid questions. If your questions are about fiscal policy and macroeconomics, that may be great to understand, but that has only very little to do with your money. What you really should be focusing on is making sure you're saving more than anybody else, making sure your asset allocation is properly diversified. And if you really want to protect yourself, do a great job at work, get a raise, or even start a side business, because those are ways that that you can mitigate against any risk, whether it's hyperinflation, tax policy, political person A, winning over political person B. All that stuff can be mitigated if you yourself have enough cash and a diversified portfolio to ride out any storm. So if you have any questions, leave a comment and I'll be happy to respond. And I hope this was the first of many videos to come. Thanks a lot.
