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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
