As investment strategies vary across generations, co-host of The Ramsey Show and author of Breaking Free From Broke George Kamel joins Yahoo Finance Live to discuss investing strategies to steer clear of.
Kamel cautions that “if you follow the trends, you’ll fall for the traps.” He notes that young people often overlook the investing strategies of older generations, leading them into risky ventures like NFTs, cryptocurrencies, and permanent life insurance. He advises investors to adopt a long-term mindset and be “a crockpot in a world full of microwaves,” avoiding impulsive entries and exits from the markets.
Kamel acknowledges that cryptocurrencies are currently the most attractive asset class. However, he expresses concern that young people are ignoring traditional investment vehicles like 401(k)s and IRAs, instead placing “all of their bets on crypto.” He likens this approach to “virtual roulette” stressing the importance of taking preliminary steps such as getting out of debt, establishing an emergency fund, and investing in mutual funds, which have “proven to be successful over time.”
Kamel explains that there are “three stooges” to wealth building: greed, fear, and pride. Greed, he notes, is the “get-rich-quick” mindset that drives people to seek rapid wealth accumulation. Fear manifests as FOMO (fear of missing out) and mistiming the market. Pride arises when investors believe they know it all, leading them to invest in certain stocks at specific times with unwavering confidence.
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Editor’s note: This article was written by Angel Smith
Video Transcript
BRAD SMITH: Making the right investment decision, it is not easy. And while there is no one-size-fits-all playbook for investing, making smart investment decisions can help you get one step closer to achieving your financial goals. Now, every once in a while, investors will make poor decisions, and fall into some investment traps that could cost you thousands of dollars.
To break down what investment traps you need to avoid, I’m joined by George Kamel, who is the host of the George Kamel YouTube channel, co-host of “The Ramsey Show,” and the author of “Breaking Free From Broke– The Ultimate Guide to More Money and Less Stress.” There you see the cover of his book. George, Thanks for taking the time here today. What is the number one trick that people can start to implore right now in order to avoid some of the investing pitfalls or traps that are out there?
GEORGE KAMEL: Well, I always say if you follow the trends, you’ll fall for the traps. And unfortunately, a lot of young people out there, they’re kind of spooked by the stock market and what their parents did. And so they’re turning to things like NFT and crypto, and even worse, permanent life insurance has made a wild comeback. If you look on Instagram, you see the words “tax-free wealth strategist,” that’s a sign you’re about to get scammed.
So if you can just instead be the crock pot in a world full of microwaves and have that long-term mindset, and stop timing the market. Don’t jump in and jump out. Just enjoy the ride. And if you see this show, you’ll see a lot of green, you’ll see a lot of red, it can stress you out. So you got to just be calm and look for the long term.
BRAD SMITH: OK. So let’s walk through some of them because, sure, if I was interested in, you know, fuzzy penguins, then maybe I would have bought into a lot of NFTs or tokens out there. But at the same time, I would have been needing to be ready to incur risk, more outsized risk, than some other asset classes or areas of the market.
I bring up NFTs, of course, because it’s tied into some of the riskier or trendy, as you mentioned, at the time, parts of the financial and investment conversation. So crypto, NFTs, permanent life insurance, which one is really taking the cake from your own purview?
GEORGE KAMEL: Well the one that’s sort of the sexiest right now, of course, is crypto. With Bitcoin shooting up in value, everyone’s going, see, we were right. We should all be in crypto. And the problem is young people are avoiding tax advantaged retirement accounts like IRAs and 401(k)s, and instead hedging all of their bets on crypto and that worries me.
Because we also get calls on “The Ramsey Show,” where people go, I put all my money into this coin because my buddy told me it was going to be the next one to take off, and now I lost all my money. You have to remember this is some virtual roulette you’re playing.
This is still gambling. And I’m not anti-crypto, but you’ve got to be doing the right things first. You’ve got to get out of debt, you’ve got to have the emergency fund, you must be investing into those tried and true investment assets like your 401(k), the IRAs, index funds, mutual funds, that’s what’s proven to be successful over time.
BRAD SMITH: George, it’s interesting and we showed your book earlier here. You talk about the three stooges of wealth building. How did you come up and come down to this, and what are they?
GEORGE KAMEL: Well, as I’ve taken calls on “The Ramsey Show” and talked to so many people, I found that it really boils down to three things. It’s greed, fear, and pride. Those are the three stooges of wealth building. And greed is that intense selfish desire to build wealth really quickly. That’s the get-rich-quick that can throw people off because you don’t make good decisions when greed is at the forefront.
Next is the fear, a lot of people have FOMO. What if I miss out on this investment and the timing and the market and this crypto? And instead, you should have JOMO, the Joy of Missing Out knowing that you’re doing the right things. You’re building wealth with confidence and peace. And lastly, you’ve got pride, and this is the thing that says I’m better, I’m smarter. I know exactly what stock to invest in. And that’s when people lose their butts.
So instead, you’ve got to have humility. And so if you can have that generosity thing to fight against that greed, you can have the JOMO to fight against that FOMO, and then you have the humility to fight against the pride, I found that is the most peaceful way to build wealth.
