The BIGGEST Mistake That Will Cost You Millions

Why are you freaks so obsessed with individual stocks? I need to pick the right stocks. If you just pick Nvidia, you could be rich. Real investing is not about picking individual stocks. If you're still picking individual stocks in 2025, you are not investing. You are gambling. You might as well take all your money, put in a big old Ziploc bag, and just light it on fire. At least you'll be skipping the middleman. I'm going to give you five reasons why investing in individual stocks is one of the worst things you can do with your money and what you should do instead. Reason number one, you're not going to pick the right st. When I was 15, my dad helped me open up a custodial IRA at E Trade. I had a few thousand bucks from some high school jobs like being a pizza maker and a soccer referee. So I started looking for what to invest in. Now, for little old Ramit, this was about as exciting as it got. I know a lot of you went to parties. Not me. I started doing stock research, which consisted of looking at which stocks went really high and really low because I thought higher risk equals higher reward. And I'm young, so I can take the risk. Next, I restricted my searches to technology. Why? Because I understand technology. I did not understand technology. And finally, I read magazines like the Industry Standard, which hyped several different tech companies as they swelled to hundreds of pages of ads during the dot com boom. So I ended up buying three. The first JDS Uniface, which was an optical communications company. The stock effectively went to zero. Next, Excite, an early search engine, which was renamed exciteome after being being acquired. It went bankrupt. And then I bought a little company you may have heard of called Amazon.com and my investment of a few thousand bucks turned into a lot more. Well, I should be proud of myself, right? I picked the right stock. I won. Wrong. It might seem like I won, but it was actually pure luck. It was not about me being a good investor. It was a freakish once in a generation winner. Many people take away the wrong lesson from that story. They go, just pick the next Amazon. No. Finding that one stock is like finding a needle in a haystack, except you don't even know what a needle looks like. The reality is, most people buy stocks they've heard of because of some hype. Their friend, their taxi driver, some dentist. But by the time you hear about it on Twitter, a lot of that opportunity may be gone. Plus, for every Amazon, there are hundreds of companies that look promising and go nowhere. The truth is, picking individual stocks is highly risky and not particularly rewarding. Most people lose. Next, I'll talk about a safer way to invest, including rebalancing your portfolio, which is something most people can do on their own once they learn the skills. But if you already have a complicated portfolio, or if you just want peace of mind that someone is looking over your investment allocations and taking into account your age, income, when you want to retire lifestyle, it can be helpful sometimes to work with a professional and a great option to help you get clear answers is a flat fee based financial planner like our sponsor Facet. Facet will help you understand and expand your financial opportunities by providing you flexible access to a team of financial planners, CFP professionals, and a team of professionals providing guidance across retirement planning, tax strategy, estate planning and more. And the best part is instead of taking a percentage of your portfolio, which is a big no no take, they charge an affordable flat membership fee. We've even partnered with Facet to run scenarios for many of the couples on my podcast who have more complex financial situations and they've been incredibly helpful. Now, a financial planner is not for everyone, but if you want a second set of eyes on your investments, check them out@fassit.com ramit. You can set up a free call and see if they are right for you. Check out their membership options@fasst.com ramit or or click the link in the description below. Now let's get to the next reason you shouldn't invest in individual stocks. Reason number two you will not rebalance your portfolio. The first problem is you don't even know what rebalancing is. What happens when you want to retire and you have 80% of your portfolio in two different stocks? You might go, wow, sounds great. What happens if one of those stocks goes down by half? You see, when you're young you can afford to take more risks, but as you get older you your investments should shift towards being more conservative. And if you're stuck obsessing about individual stocks, odds are you are not rebalancing properly. Let me explain. Rebalancing means you have a plan for your portfolio and you are constantly making tweaks to make sure that your portfolio matches your plan. For example, if you want to have 90% equities and suddenly because your stocks have gone way up, you have 96% equities to rebalance, you would sell those equities to take you back to your plan. Now, without proper diversification and rebalancing your portfolio becomes very risky and wildly unpredictable. Here's a little known fact. One major predictor of how well your portfolio does actually depends on the mix of the investments within it or the asset allocation. Asset allocation is your plan for investing. That is the way that you allocate investments between stocks, bonds and cash. In other words, by diversifying your investments across different asset classes, you have the ability to control risk in your portfolio. And therefore, as a byproduct, how much money on average you will lose to volatility. Now it turns out that the way you allocate your portfolio, whether it's 100% stock or 90% stocks and 10% bonds, makes a huge difference in your returns. Let me give it to you in a simple example. Your investment plan is actually more important than any individual investment. It's like how the table of contents in my book is actually more important than any individual page. That is why rebalancing your portfolio is so important as you get older. And here's the kicker. Most people don't even know they're supposed to rebalance. They just buy random stocks, hold onto them forever and then hope for a miracle. And when the market drops, they panic. Let's say a few years ago you decided you want to have 5% of your portfolio in Bitcoin. So you bought it. Look at how much Bitcoin represents in your portfolio today. Now, to rebalance, you should sell everything above 5% to get back to balance in your portfolio. Are you going to do that? Of course not. Because nobody wants to sell something that is going way up. This is why rebalancing fails. The concept is good, but humans are very bad at wanting to rebalance. And this risk applies to crypto, individual stocks, or any investment in your portfolio. This is one reason that I encourage the individual average investor to look at target date funds. Target date funds are one fund. They are automatically diversified and over time they automatically rebalance as you get older. Now you can make the case that if you have a properly diversified portfolio, you may want to have a little fun with your investments. Maybe 5% goes to something fun. It could be an alternative investment like crypto. It could be your friend's bar in Brooklyn or an individual stock, that's fine. But if you choose that route, then you should set up a plan to regularly rebalance. Most people do it once a year. Reason number three, you're emotional with money. I know all the logical freaks watching this video going, emotions, those are weakness. I don't. Yeah, well, how come you cry sometimes when you're watching somebody on Twitch. Who wins their video game faster than you've ever seen? Or when a general is saluting at the end of a movie and there's rain coming down? Why you all crying? Bunch of spreadsheet nerds. We are all emotional creatures, and money is deeply emotional. Whether you want to admit it or not, this is exactly what happens. You see the market tank. Oh, my God. Sell everything. I don't know if it's ever going to come back again. Or you see a stock go up 50%, better buy it now. FOMO, literally. Americans love to buy high and sell low. I'm not kidding. Do you realize how ridiculous that is? The saying goes, buy low and sell high. Really? You're not going to buy any. Just buy on a regular basis called dollar cost averaging, you freaks. This is why the indexes return about 10 to 11% per year. But the average investor gets this return. Look at that. Why does the average investor get that? Because they buy all the time, they sell all the time. They get scared, they get fomo. You'd be better off just putting your money in an index and letting it ride. But you don't want to do that. You want control. Oh, I need control. You know, control might be good in certain parts of life, but in your money, you should actually want less control. Here's what happens when you invest in index funds instead. You're taking most emotions out of the equation. You're setting up automatic investing. Whether the market is up or down on the 1st of every month, money is automatically going in there. And over time. When it's low, you're buying more. When it's high, you're buying less. But you're still buying. And you will come out ahead of the average investor. It is amazing. And the truth is, the best investors are boring investors. Look, if you want to learn how investing actually works, hit subscribe, turn on notifications. I put out a new video each week on investing money, psychology, and living a rich life to help you build confidence and competence with your money. All right, next up, reason number four. It takes way too much time. You really want to spend 40, 50, 60 hours a week picking individual stocks, only to lose to a Vanguard index fund? Look, let me give you a short little list of everything you should do if you want to pick individual stocks. Gather the right tools and resources.

Brokerage account, stock screen, financial news platform spreadsheets, company filings, market data sources. Level up your investment knowledge, including investment basics, financial ratios, metrics, macroeconomics, technical analysis, fundamental analysis, Review information sources, including 10Ks, 10Qs earning calls, competitor analysis, industry reports, analyst opinions. Evaluate key metrics including financial evaluation, performance, growth potential, improve your investment skills and.

Have include critical thinking, patients, risk management, continuous learning. You got to do all of this. You're competing against people who are paid millions of dollars in New York City to do this all the time. And you think you're going to compete while you're eating ramen noodles, sitting there going, oh, this guy on Twitter said I should buy Twitter. What the is wrong with you? Meanwhile, people who invest in low cost index funds, they're like, market's up, don't care, markets down, don't care. They're spending time with their family and friends, they're traveling, they're moving up in their careers because they have put their investments on autopilot. Reason number five, you're not going to beat the market. One of my favorite things happening on Twitter right now is a bunch of people who are complaining that they cannot get a job even though they are so smart. And they go around talking about I had a high SAT score. First of all, people who have a high SAT score do not say I had a high SAT score. They just write the number, okay, right there. I can tell you did an have a high SAT score. Then they go, I did this. I tried to work here and nobody gave me a job. Is it possible you're just not good? Is it possible you should hit the books as it relates to stocks? You cannot reliably pick stocks that will outperform the market over the long term. You're not that smart. And I'm not being condescending. I'm not that smart either. It is way too difficult to compete against the global market and there is very good research showing that that the individual investor will not beat the market. Let me show you about 80% of professional fund managers. These are people who have essentially unlimited resources and spend their lives studying the markets, fail to outperform the S&P 500. So if they can't beat the market, what makes you think you can do it while scrolling Reddit on your lunch break? Please stop going down these investment rabbit holes. You're not going to find some secret investment strategy from some random guy on TikTok. And I hate to say it, but not everyone is a winner. In fact, most of the so called financial experts you're listening to are investing failures. The S&P 500 has historically delivered about 10% per year, year after year. That's 7% per year after inflation. That is incredible. But when you pick individual stocks, you're taking a huge risk. Even professional investors like David Swensen, who had all the access in the world, said that individual investors like you and me should invest in a simple index fund. Why try to guess what stock will win when you can own the entire market and have relatively predictable returns by investing in a low cost long term index fund? So here's the bottom line. Stop gambling with your money. Instead of picking individual stocks, invest in a low cost diversified fund. It's simple, it works, and it will let you live a rich life over time. If you want to learn how to make more money than you ever thought possible, use my Complete Investing Playbook, which you can watch right here.