Ramit Sethi tells Jana to stop chasing currency trades and exotic investments. The real money move is boring: automated investing in low-cost index funds. Most people want sexy alpha when they should be doing the unglamorous work that actually builds wealth.
You guys, look at these questions I get. What are you trying to do? Are you trying to drive me to kill myself? I'll do it on camera. Look at this question from Jana. I've heard of people exchanging their euros to Australian dollars because they believe the Australian economy is stronger. I thought it a bit exaggerated, but what do I know? Also, the dollar is going down. Now, any thoughts on that? Problem number one, whenever you ask a question which ends with any thoughts on that? Yes, I do have some thoughts. First of all, what's your real question? Second of all, why do you ask this question? What is the question about currency exchange? Let me tell you what's really going on here. Somebody, Jana, very nice reader and I appreciate you reading my stuff, heard one of her jackass friends saying, oh, I've been doing currency devaluation studies and it's clear that the euro is going into the tank, so I'm going to capitalize and arbitrage myself. Yeah, no, this is what's going on here. People who think that they want to, they want to beat the market, they want to get alpha, as it's called on Wall Street. These people typically never even set up an automated investing system. They don't invest in index funds because that's boring. It's boring. To get 4, 5, 6, 7, 8%, that's just boring. No, I need to get into derivatives. I need to get into currency fluctuations. Do I understand anything about currency fluctuations? No. Do you? Do I know that people on Wall street, the smartest people in the world who study this all the time, don't even know about currency fluctuations? No. It's clear that the Australian economy is stronger than Europe. So clearly that must trickle down into us making money on currency. Wrong. Anytime you hear people talking about alternative investments, anytime you hear individual investors talking about alternative investments, you can be pretty clear that they don't know what they're talking about, okay? Because they want to get alpha. They want to make a ton of money. But instead of setting up the boring, necessary work of investing, automatically picking low cost funds, because it turns out that in investing, cost is one of the biggest determinants of your returns of all, okay? Instead of that, they want to talk about what's sexy. What did I read on the COVID of Business Week this week or Investing World? No, you don't need that as an individual investor. For forget about currency fluctuations, forget about Chicken Little, and the world is falling down automatically. Continue investing over the long term. If you believe that over the next 10, 20, 30 years, investment returns will continue to outperform many, many, many other asset classes. And I'm talking about traditional investment returns like stocks. Okay, so Janet, great question. I'm glad that you asked it. But in short, ignore this focus on automatically investing in low cost funds. You'll be doing much better than your currency crazed friend. Thanks.
