Most Shared Moment: How To Get Rich *SLOWLY*: Scott Galloway

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0:32The email I get most is from young men looking for guidance and mothers looking for guidance for their for their sons. The second most frequent email is the following. Is it too late to invest in MVIDIA? And the honest answer is I don't know. I can imagine a scenario where it gets cut by 80 % I can imagine a scenario where it triples. So this is what you do. You invest in SPY. Because about 20 % on the dollar will go into the magnificent 7 because they're about 20 % of the market cap of the S &P. SPY is again a basket of different stocks. It's it's an index fund that mimics the S &P. So there are 500 companies in the S &P.

1:10Invidia is probably 3 or 5 % of the total value of the S &P. So 5 cents on your dollar goes into NVIDIA. Right? About 20%. Is that right? 24 or 25 % is the magnificent 7. The tech companies we talk about 25 cents on your dollar will go to them. So assume those companies double. Great. You participate but assume the other 493 companies finally get their time in the sun and those companies go down a half. You're still fine. You're still fine. Again, you don't need to find the needle in the haystack and stop believing in a very American way that you can figure it out. I know the brightest people in finance and what that my net conclusion is that none of them have any fucking idea.

1:54Some have a little bit more of an idea. But if you look at the entire alternative investments industry hedge funds, private equity funds, mutual funds, anyone on CNBC, if you took all of their returns and aggregate, they're less than the S &P by the amount of their fees. It's one of the greatest grifts in the modern economy is believing that some guy who looks old and unhappy and has suspenders and went to Harvard knows more about the markets than you. All you need to know is diversification, right? SPY starts saving young and then the next best piece of advice is if you can, if you can, force savings.

2:3898 % of us will spend everything we get our hands on. It is very hard to have the discipline to take money that is within your grasp and invest it. Force savings plan. Find out at work if they have profit sharing or IRAs or Roths, whatever the, I figure what it's called here, where if you put some money aside, the government matches it, pensions. Well not only pensions, but there's something here I figured it's called. If you save 5 ,000 pounds through your work, the government I think will match it, put in a thousand pounds. There's all sorts of saving schemes at work. 8 corns, the apps that round up to the nearest dollar and then immediately shoot it into SPY, try as hard as you can to put yourself in a position where you invest despite your best efforts not to because the majority of us will get that money and go buy a flat screen TV.

3:28And when you're saying investing, I think because it can sometimes uncomplicated from someone that so far away from it, there's apps on our phones now where we can in a couple of minutes, invest in the exact thing you've just said from, we can make an account in a couple of minutes. I'll probably ask for our passport, take a photo of our passport. There's so many different apps where you can go in and invest in the S &P 500. You don't need to pull someone or know someone and you can invest, what's the minimum you can invest a dollar a dollar a dollar a dollar. Go to public dot com. I mean, start with a basic, a basic low cost ETF for index fund SPY.

4:00If you want to get take a little bit more risk and you want to be in tech, there's all sorts of ETFs and index funds around tech. You're going to every young person, especially young man, is under the impression they're smarter than they are and that they can beat the market. So okay, take 30 % of your money, have some fun by Starbucks and Vidya, Unilever, Novo Nordisk, whatever you think you have inside into. So you can learn a life lesson that over the long term, you don't know what you're doing and just put it in an index fund. Because the marvelous thing about the human race is we become more productive and the Western economy is generally speaking over the medium and long term or up into the right.

4:37And again, and I'll go back to my algorithm or equation. Focus, find something you could be good at, maybe great, that has a 90 plus percent employment rate. Stoicism, we haven't talked about that. Realize there's something you can't control. Focus on the things you can't control. One thing that is within your control is spending. Try and find a partner, try and gamify spending. I spent $78 a week, my summer between my junior and junior year, including rent, because I needed $3 ,300 to go back to school. I partnered with five other guys in my fraternity and we gamified who could spend the least amount of money.

5:11Find a partner who's aligned with you around spending and saving, right? Realize no one's as impressed or thinking about your shit as much as you are, right? Try and find reward from exercise, from relationships, not from signaling wealth with kind of stupid shit, right? I call that stoicism, it's really more about discipline. Develop a savings muscle, one, an appreciation for time and how fast it's gonna go. I was stupid. I remember my best friend, Lee Lotus, picking me up to go to the beach when I was in college and he was scrambling to find $2 ,000 to put it into something else, an IRA Roth, whereas company, a bank he was working for, he was just out of college.

5:48If you found $2 ,000, they would match it with another $2 ,000. I thought, I said to him, these exact words, if $2 ,000 means anything to me when I'm older, shoot me. I have made so much more, much more money than Lee Lotus and he is a multi -millionaire now, so am I, but I've endured a lot more risk and a lot more ups and downs, because he was that lame guy scraping together $2 ,000 when he was 23. I went out and spent my first bonus check at Morton Stanley, I got $28 ,000, my first year out of college, Morton Stanley, $28 ,000 check, I go out and I buy a $35 ,000 BMWs, hung swim goggles from the rear view mirror thinking that would impress people, I don't know what I was doing.

6:29I figured out if I had bought a Hyundai for $9 ,000, which you could get in 1987 or whatever it is, and invested the other 20 in SPY, never looked at it again, I would have enough money now to buy 11 Ferrari's, including that new electric Ferrari that for some reason appeals to me, which makes no sense, an electric Ferrari. Anyways, you're gonna love this. I tell the people who work for me that I drive up in a Ferrari and I say, if you work really hard someday, someday I'll have two Ferrari's. Anyone can say it. I don't have a Ferrari by the way. My other joke about a Ferrari is, Ferrari's like having a long, consistent erection.

7:05I don't have a Ferrari. Anyways, anyways, where were we going? Realize people aren't as impressed with your shit as you are, recognize the power of time, and then the thing where I really screwed up Stephen, diversification, take some money off the table, invest in, I'm hearing from employees in video, we talked about this, diversify. You get, it's such a bulletproof Kevlar for your mental health. You get risk -free return. Nobody knows anything can happen. Amazon 1999, again, lost 90 % of its value. Do you know the kind of mental language when you go into a stock like Amazon and you lose 90 % of your investments?

7:48So if you want to have some fun, ring fence it to 30 % of your savings, pick some stuff, and it'll be a good life lesson for you. You may get lucky, more power to you. Over time, you're going to realize nothing beats over the long term, Warren Buffett, what are the third wealthiest man on the world? I'm giving you the same answer he gives. If someone has $10 ,000 out of the invest and he's like, low cost index funds. To tune off our conversation. To get... My luck concludes. Put it in the ass, low cost index. I know it's the boring shit that makes you rich. It's also... I advise a lot of CS. It's the boring and criminal stuff that moves shareholder value.

8:32No, it's so true. So one of the things that stopped me when I was young from doing exactly what you just said is I didn't think that the $500 I had or the 500 pounds that I had was enough to get started. So I said to myself in my head, I thought, okay, when I get a million all become an investor. And I think a lot of people actually listen to these kind of conversations and go, okay, once I've got $5 ,000 to suppose to link them a month, then I'll do what Scott said. But there's no point in doing it with a small amount of money. I wanted to use this little bucket of sand here as an analogy for this because my team brought a bucket of sand to illuminate the power of compounding interest when you invest in these S &P 500 companies.

9:11And this glass represents investing 1 ,000 a month in the S &P 500 over the course of 12 months starting at the age of 25. Right. But if you left it and kept investing at that rate by the age of 65, it would look like this. You have Zoom a beach.

9:31Oh my God. Thank God that's you. It would look like that. And this is really what you're saying when you're talking about ETFs. Well, you asked that question about the young man who says, I'm gonna wait till I get, I have 500 pounds, I'm gonna wait till I have a million before I start investing. The way you get a million pounds is by investing that 500. We don't believe we're gonna get old. We don't recognize how fast time is gonna go. We don't appreciate the power of compound interest. Don't focus on your investments. Put it in low cost, low energy, ETFs. Start early. You have your advantage when you're young is time and you're gonna get that bucket of sand.

10:13By the way, this right here isn't a lesson in investing. This is a lesson in storytelling. A bucket of sand. I mean, who thinks of this? Leave it out the way. But it is, it is. I discovered the art and the science of compounding interest too late in my life. And I just wish someone had slapped me in the face with it at 18. Yeah, it's crazy. Honestly, I probably started at 28. That's still earlier than most people, but it goes to the notion of back to the advisory young person. Most young people don't have the discipline to invest any money they get their hands on. Because a capitalist economy is the smartest people in the world with the most godlike technology are presenting you with amazing, irresistible offers to upgrade from economy to economy comfort, to add, to add, flareless chocolate cake to your order from Balza's Arbalangery in one minute or less.

11:07I'm like, oh my god, oh wait, there's three other people looking at this room, this hotel room and it's going on sale. And I bet it's so difficult to hold onto any money. You want to find ways of for savings. A house is for savings to a certain extent. Because people don't want to be evicted from their house. Going to work for a company and getting options and getting equity that gross tax deferred, that's sort of for savings. But you want as a young person to try and find as many ways as possible to have for savings and an app that rounds up to the nearest dollar and then invest, no matter what, that is for savings.

11:41It is very difficult to take money that is in, ever come suit your hands and invest it. So it find for savings mechanisms that are taken out of your check, find out if your company offers any sort of investment or savings schemes that they match or that the government matches. And most corporations offer something. Real estate. I've had a lot of guests talk to me like Morgan Haussel and others that have a sort of mixed view on where the real estate is a good investment. What's your thoughts on it? Should I be investing in real estate? But you know, my brother said something to me when I was 25, he said Steve, if everybody is playing the game, there are times probably aren't great from it.

12:22It goes back to sex appeal, too much capital going in. Well, like, K -Shiller, the brightest people in real estate will say if you really account for maintenance and upkeep that real estate has not outperformed other asset classes. The reason I like real estate is that one, in the United States, it's very tax advantage. There are very few asset classes you can lever up four to one. 20 % down payment. I can't buy 100 dollars with an Apple stock for 20 bucks. So it's a huge leverage. The interest on that is tax deductible. In addition, if you sell a home, this is true in the US, I don't know, in the UK, if you buy home and sell it after, hold onto it for at least two years, you get a $250 ,000 tax deduction, $500 ,000 for married.

13:08So if you have, for example, any ability, get to know the homes in your area, find a nice home or a rental unit that you can maybe rent out or upgrade. Maybe you're handy to do that every few years and take advantage of the tax deduction and then roll into something bigger. And that is for savings. You know that mortgage payment is coming every month. Actually, the majority of savings for baby boomers right now is in their homes. It's the equity in their homes. Now, unfortunately, that's, there's some bad things. We haven't improved housing permits as quickly as we should, which has made it more expensive for entrance.

13:45Young people kind of forward homes. The average homes gone from $290 to $420 through the pandemic in the US. And if you look at interest rates, it means the average mortgage payments gone from $1 ,100 to $2 ,300. So it used to be two thirds of America could afford a home now. It's one third. I told other talk show, but I just did a TED talk on the war on the young economically. But real estate is a very tax advantage industry. It is for savings. Also, there is some, I think, psychic value, which I think is important to a home. You start investing in it, fixing it up. It feels like, I don't know, it's just there's something rewarding about it.

14:20But to what your brother said, when everyone's trying to buy homes in an area, that usually means it's probably getting overvalued. And like any other asset class, it can lose money. But the reason I like it is because it is a form of for savings. People generally speaking, we'll make that mortgage payment or try and figure out a way. Now, you want to make sure that not more than 40 % of your income goes into a house otherwise. It's just going to be your anchor. It's just going to be a source of stress for you. And I think a lot of people go up thinking, I have to have a home. And so they just become over levered in their home.

14:54And they become kind of house poor. They own a house and that's it. And they can't afford to do anything else. And they might be able to able to move then. And you talked about geographical opportunity when you're young. That's right, you get tied down, especially if your home goes down in value. But I still think it's in the US at least, real estate's the most tax advantage. And if you own commercial real estate in the US, you can depreciate it to a 3 % a year. You can't depreciate a stock to a 3 % a year. Is there someone that shouldn't shouldn't buy a home then in your view? Is there a certain demographic or age or person with a certain talent that shouldn't shouldn't buy a home?

15:26I would say in general, if it's a home, if you think that you're not going to be able to hold onto it for at least seven years, if you hold onto a home for seven years, you should be able to write out most economic cycles or economic down cycle. I think there's some wonderful things about renting. You can slam your keys down and leave. If you're planning to move, if you don't have somewhat reliable sources of income, a mortgage is probably a tough thing. I don't know, I think home ownership, I'm talking my own book a little bit here because I've made good money in real estate. I've really enjoyed it.

16:01But I think it's situational and it goes back to that notion of having a kitchen cabinet of people who can advise you on that asset class. Unfortunately, that asset class has become so expensive that the quote unquote, American dream of owning a home has become somewhat of a hallucination, if you will, or a fantasy for a lot of young people.

16:24The Dyer of the Seos brought you by progressive insurance. Do you ever think about switching insurance companies to see if you could save some cash? Progressive makes it easy. Just drop in some details about yourself and see if you're eligible to save money when you bundle your home and auto policies. The process only takes minutes and it could mean hundreds more in your pocket. Visit progressive .com after this episode to see if you could save progressive casualty insurance company and affiliates. Potential savings will vary, not available in all states.