Financial Advisors React to Viral Money Advice

[00:02] videos. Let's check out what they've got going. And I am so excited because they didn't tell us if these were viral in a good way or viral in a bad way. So, >> One of the stupidest things I've ever seen people do in my life is save money

[00:16] when they are young. If you are below the age of 25 and you're a smart, competent guy, why are you putting money in a retirement fund? >> Little thing called compounding growth. >> You can always make more money yourself

[00:28] than by betting on other dudes. Is it even appropriate for you as a grown man [clears throat] your dream is to be in the Bahamas sipping on fruit margaritas old men do the hard work for you of making money? Like what what are we

[00:43] many stupid things. First of [clears throat] all, you're not investing decisions, so you put things in the the VOO, the SPX to let other people make the decision for you. Second of all, you don't trust yourself to have

[00:56] the competence to make more money on your own than what is it? 10% a year? Like really? And finally, the one quote that everyone always gives me is, "Oh advantaged and I'll be able to pull all this money out and not pay my 40% tax

[01:10] when I'm 65. Are we serious right now? When I'm 65, like what is what can I even buy with that money? Like extra applesauce?"

[01:23] Because he poo-pooed all over compounding growth. >> First, just language. We don't need that. Secondly, when you invest, you actually take ownership in corporations. I'm not betting on some guy or some

[01:37] person. When I go buy the S&P 500, I'm becoming an owner of Apple, of Google, of Nvidia, of Tesla, of Home Depot, of fill in the blank. That's what investing is. It's not betting on someone else to manage the money. It's literally

[01:53] participating in the the in which we operate. the time you're you're at that retirement age, around $95 a month will millionaire and you wait until you're 40 years of age, you're going to have to

[02:07] >> 10 times as much. >> is 10 times harder to do it. You can do start early because of that magical thing of compounding growth. The other thing that he didn't even cover, it's free money. Mhm. These things are tax

[02:21] advantage. So, I I think there was a lot there. I imagine he's he's going to >> Well, I didn't know what the alternative was. He never All he did was poo-poo on investing. Well, investing is just simply a place to park money that you've

[02:34] already earned so that that money can start working for you. >> I didn't get There wasn't a lot there. And then all of a sudden like he was as a normal video and then he started dropping the F bombs. It just seemed

[02:46] very disconnected. It's almost like he wanted the explicit lyrics label on it What's the best financial advice you've ever gotten? Save $20 a day. 20 a day times 365 7,003. A year times 2 years [music] 14,006. 3 years 21,000.

[03:03] 10 years 73,000. Compounded interest 78 grand. Save 20 a day and you always keep broke away. The reason why people don't have money is not how much money you get paid. It's how much money you save. I know people who work McDonald's minimum

[03:18] wage and they make more money than people make $40 an hour because they understand where they at. So, they save trying to get high. And then the people who make more money, they spend more money and they get more habits. You know

[03:31] >> Yeah. And good luck in life. You know what I mean? But you got to save money. Without saving money, you got nothing to invest. Give that man a podcast. >> Preach, man. All right, what did he say? $20 a day will keep broke away. Is that

[03:46] >> that. >> I like that a lot. He's exactly right. That's what It doesn't matter how much money you make. It doesn't matter where your income is. It doesn't matter how successful you are. It matters what you

[03:58] do with it. So, whether you make $100,000 a year or whether you make $100 a year, if you can defer some of that into the future, you can set your future >> to live on less than you make. That's the reality. You live on less than you

[04:12] actually allows you to start saving and investing, and eventually your army of dollars works harder than you can. That's what he's saying. Just do >> I love that the numbers that have $20 a day lines up quite nicely with what you

[04:27] even started an investment account, load yourself up today. If you need more, go We'll hit you up with some free stuff. >> Is a Roth IRA still worth it in 2026?

[04:39] >> Yeah. Listen, I don't like Roth IRA. George Bush created the Roth IRA. You know why he did it? Because he needed money, and there was a ton of money locked into 401(k)s. There was lots and lots of money back then. The economy was

[04:55] going down, and and he he he needed to get unlock these the this money that hadn't been taxed. Well, how does he do it? Pay. Convert your money into a Roth IRA and pay the taxes now, and so you won't have to pay it later. I'm earning

[05:10] money on that. Why would I Why would I give it up to the government so that I don't have to pay taxes later? I really don't like the the Roth IRA. And I know everybody pushes back, and but if you do an apples-to-apples comparison of the

[05:24] true cost, you're you're going to do better in a in a traditional 401(k). bogus? Is the Roth IRAs, when they came on the scene, remember the the funding limits were around $2,000.

[05:38] Roth conversions also had a an income cap on them. It wasn't until 2010 that they that they lifted the cap off of where high-income and wealthy people could start doing Roth conversions Um no matter how much money they made. So, I

[05:52] disagree and actually I know in my book Millionaire Mission I give the history of the the Roth IRA and it was a truly bipartisan support bill [music] to try to encourage people you know and the Senator Roth who kind

[06:07] of pushed things forward, the quotes on this on the why was directly to impact and [music] benefit the saver so that they have money in the future. So, I I'm not as cynical as it [music] you know George H.W. Bush you know decided or

[06:23] George W. Bush decided he needed a little few extra jingle in the treasury >> Well, and also he's completely wrong. His apples to apples was absolutely inaccurate. Uh if your tax rates are going to be lower in the future than

[06:39] they are today, then yeah, you should save in pre-tax. But if you're in a low tax bracket environment today and it's likely your income is going to increase and be higher in the future, Roth 100% makes sense. There is a tax arbitrage

[06:52] that exists whether you have a higher tax rate now, lower tax rate now, higher tax rate in the future, lower tax rate in the future, they are not apples to apples. There absolutely is a better choice than the other depending on your

[07:05] unique circumstances. He's just absolutely wrong on that. Traditional absolutely wrong on that. Traditional does not always win out.

[07:17] What what's going on there, Bo? I think he's he's I guess not. He Okay, what I think he's trying I think he's I think he's trying to get the thing to go up. I think he was blowing on it to to to try

[07:30] you. When I I remember the first time I ever went fishing with my granddad, he told me if I held my mouth a certain way that I'd catch more fish. Now I >> work. >> That's not the way you do it.

[07:43] feel like that somebody told him hey that if you want to just, you know, really amp up the buy low sell high, you know, hold your mouth just like this >> You know, you know whenever you play golf and you hit that shot and you kind

[07:56] of like start trying to like move it with and it's ineffective. I think a lot of people when it comes to investing, they are under the impression that they have more control than they actually do. At the end of the day, we don't get to

[08:08] control what the market does. We don't get to control when the stock goes up when the stock goes down. What we do get to control is how we participate in it and how far out on the risk [music] spectrum we want to be and how much we

[08:20] can save into it. As for like day to day, month to month, quarter to quarter control. And if you think you can control it or better yet you can read it, uh you might be in for a rude awakening. Babe, [snorts] why did you

[08:34] cash out your 401k? >> Uh-oh. So, in 2019 I cashed out over $100,000 out of my 401k He's got a thigh tattoo. to invest in real estate. And that's because 401ks are the single

[08:46] greatest scam that anybody can invest in. Now, for 99% of people, if you have no discipline financially and you don't want to invest your own money, for sure get your employer match. That's fine. But what 401ks were designed for is the

[09:00] US government literally said most people don't have enough discipline to actively invest money on their own, so we're going to create a program that forces stock market. And so the 401k is designed for you to

[09:15] not pay tax right now and then draw on it later at 65 >> pay in less tax. But the issue is I'm going to be really, really rich at 65 >> Not necessarily. >> So, you are literally

[09:31] having no benefit to having a 401k because you have zero control with that capital that's inside the vehicle of the 401k. I'm not your financial advisor. I'm not giving financial advice. If you want to ride that 401k, do it. I'm just

[09:43] saying that if you want to understand how to actively invest your money in real estate, in businesses, and stuff like that, it's much better to pay the 10% pre-penalty to go ahead and get that money out of the 401k to where you can

[09:56] control it and actually grow it and do something with it. I don't understand. like, "Oh, you put money in a 401k and that money has to sit there until you get to 65." Yeah, that's the point. The 401k money,

[10:08] that's retirement money. It's supposed to be for you later in life. But, that's why we like saving into Roth IRAs and saving into 401k and saving into after-tax brokerage. We're not even against real estate, but it's not an all

[10:21] or nothing and you want to make sure that you're doing it in the right order. So, why would you not use this unbelievable tax-incentivized vehicle to >> The argument falls apart if you just did a Roth 401k. Over 80% of employers offer

[10:38] deduction now, but you get that compounding growth completely tax-free forever. So, if you're young and you what you ought to take advantage of. It's a really good opportunity. The

[10:51] lucky than good sometimes. He did this He bought He did his transaction. Let's face this. He took a 10% haircut immediately >> to pay a penalty. Now, it's plus the income taxes on it. So, he

[11:05] gutted his to put it into real estate. Now, [music] he's likely lucky because he got it right before the huge inflation run-up of real estate that 3-year period, we had real estate markets make over 50%. But, if you think

[11:19] that we don't have a reversion to the mean with with real estate, did he really make a smart decision or did he just get lucky with the timing of this? And anybody who watches this bad advice, you have to understand that levered

[11:32] debt, [music] yes, it can make you better returns, but there is tremendous risk. If you If you don't believe that there's a game that when markets go bad and real estate markets go bad and we hit recessions,

[11:44] big pocket banks taking from little pocket want to be real estate investors is one of the most horrendous things you'll ever see. And it happens usually once a decade. Just don't [music] be on that side of the game. The easiest thing

[11:57] to do, build a good base deep in your own pockets. We love 401ks. We love index funds. So then you can get into levered debt down the road when you actually can afford it. >> J.P. Morgan published a chart around the

[12:11] end of '24 and it was a scatter diagram showing over the years the relationship between the S&P 500 at purchase and the return over the next 10 years. It was a negative correlation, which means the higher the P/E ratio you pay, the lower

[12:26] perfect sense. >> Sure. And it showed that historically, if you bought the S&P when the P/E ratio was 23, in every case, there were no exceptions, your annualized return over the next 10 years was between 2 and

[12:40] One of the most interesting things about the S&P, on average, it has returned 10% a year for 100 years. But do you know that the annual return is almost never >> Tells it or it dies. You know how you fix all this? Yep, I do know.

[12:55] >> Always be buying because, you know, every year in the financial markets, specifically the S&P, I'll use the same example as him, there's about a 14% spread just intra-year from the highs and lows. So you can make the argument

[13:11] year, the price if you're using things like the forward price to earnings ratio, you're going to have tremendous variances in that, no matter what that number is. I hold my nose and then I'm always buying. Every month, for me, it's

[13:25] every week. >> Mhm. I have the money just popping and what happens is is the yo-yo goes up and down. That's the daily prices of the market, yet we walk higher and higher up that mountain top of expanding returns,

[13:38] expanding economy economy because we're the I believe in the law of accelerating >> You make money. Instead of trying to beat the market, be the market. That's >> Yeah, when it comes to investing, it's more about your time in the market, not

[13:51] >> [music] >> Entering at the right PO PE and exiting at the right PE. It's about actually being in the game. That's why if you're your Roth monthly, if you're participating in after-tax brokerage

[14:05] account, and you can do it on a systematic consistent basis, you will long term. >> I never thought I'd ever have to explain betting is a lot more profitable than you think, all right? There's a common

[14:19] controversy going around that arbitrage sports betting isn't worth it and isn't worth your time because of the small return that you're getting. you. Arbitrage sports betting, you'll get 5% ROI on average every single trade

[14:33] multiple You can take however many trades you want every single day. So, >> there. You should put an asterisk right there. The S&P 500, the stock market, there. The S&P 500, the stock market, will give you 5% on average a month.

[14:46] Compare the two. When you can take 5% of however much money you put in, is not regular sports betting. You're betting on both sides so that no matter the outcome, you take that 5% on average. There's Keep in mind, there's

[15:00] clients, even me >> Oh, he's got a system. We get 15-20% arbitrage opportunities, and [snorts] that's a lot more than 5%, but it's can do this multiple times a day. So, your money's compounding every single

[15:12] day instead of per month. Why do I have to explain I don't I don't understand, bro. Well, because they won't let you keep >> Yeah. They won't let you keep doing it. That's the big That's the big asterisk

[15:24] through my own phase of maybe I could learn to card count on Blackjack >> and beat the system because there is a statistical you might have the house edge if you know how to play Blackjack in the appropriate way. The problem is

[15:39] >> if you're good at it, the Las Vegas casinos or what other casinos, they put "Nope, we're not going to let you play in our casinos." It's not illegal, we're just choosing not to let you take money from us because we like taking money

[15:53] from the fish. Yes, you can make good money doing these arbitrage bets. There's all kind of really sophisticated systems that have already calculated where there's arbitrage. You go play both sides of it, but guess what happens

[16:05] you make. They notify you, "Hey, we've noticed some unique trends in the way you're betting, so we're going to start lowering your bets to as low as a few

[16:18] pennies, a few dimes, maybe a dollar or two." They don't let you keep doing this. So, he's trying to sell you a system. Without a doubt, there are going to continue to be inefficiencies between the different gambling houses that let

[16:31] you do these sports betting, which by the way, I don't even think that's worth This is what you're doing to build wealth, you've lost the plot. Go ahead Roth IRA. Understand what index funds are, but don't let somebody sell you a

[16:44] are, but don't let somebody sell you a system that is going to immediately get betting companies are not going to allow you to take advantage of them. Do you other people to see you have it? Like if

[16:57] you really be walking around with a Louis Vuitton bag? Like I don't really rich over being wealthy. important, and material possessions often times can give people status. I saw a quote once that said, "It's not about the art, it's

[17:10] Like people legitimately care more about how other people perceive things than themselves. And the result of this is that our entire society is fake. Everybody is wearing a mask and they do things just to gain social currency.

[17:25] >> If the reason that you're making consumption decisions is to impress others and to put on a facade of how successful and how wonderful your life is, I worry that that's going to be a path

[17:37] to not being incredibly fulfilled with what your dollars can actually do for >> Wealth is silent. It's what sits on your net worth statement and it's exactly what Bo said. Don't try to impress people who really don't care and that's

[17:50] why I even in in Millionaire Mission I've I've detailed that car purchases are napalm for your finances is because a lot of us that's the first thing we do. It's the clothes we wear, it's the car we drive and you're literally

[18:04] driving and wearing your seven-figure future wealth because you're not >> [music] >> living for the now and that's that's a >> don't know what to do with your next dollar or where to go, we have a

[18:18] nine-step process to help you figure that out. So go to learn.moneyguy.com operations so that you too can know exactly what you should be doing with your next dollar. I'm your host Brian joined by Mr. Bo. Money Guy team. Out.