This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth
so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an absolute entrepreneur. All right, so you're on this path and this journey to try and find the path to financial freedom, to build wealth, to be able to be in
control of your money. Well, that's partly why we have this channel, why I have my show, and why I wrote my book, building your money machine. But here's what I've noticed, is that there's a whole lot of stuff going on out there that create complexity, complications and friction in our investing in our money, in our path to financial freedom. And when you have complexity, complications and friction, you have risk. And when you have risk, you end up losing money. That's where
losses come from. And so what I want to do is try to simplify, because the fact of the matter is, is your journey to building wealth, to financial freedom is actually a simple one. It doesn't need complications. It doesn't need complexity. Complexity will find you over time. Let's not go chasing it. So the thing is that what we want to do is simplify it. And in this episode, in this video, I'm going to walk you through five things. I think that we can actually stop doing and what to do
instead. So we can simplify the journey, strip away the complexity, strip away the complications, eliminate the friction, and, and do things in a simple way. Because if it's simple, we will do it more often. If we do it more often, we'll do it more consistent. When we do it consistently, we will consistently build wealth. The fact is, data has shown that wealth creation is far less around the money. Now, money is important, but money alone will not solve the wealth problem.
Money with discipline, consistent behaviors over time that does. So what are the things that we're going to do? I'm going to jump into five things that I think that, that we need to quit or stop and or avoid. Let's just say. And some, am I going deeper? Some of them are a little more self explanatory. So let's go jump to the first one. I'm going to jump to my, my iPad. And the first one is this no meme, trend or fad investing? What do I mean by this? Listen, why do we invest?
We invest into things that we anticipate will go up or create cash flow. That's the only reason we don't invest in things to lose. But the basis and the foundation for investing should be a logical, analytical basis. In other words, there's a business model, there's a cash flow to it, there is growth to it, there is something to it. When you invest in a meme or a fad, and I'm gonna give you an example of one or a trend, what you're investing in is an emotional journey. The meme
is it's a speculation. It's a gamble, quite frankly, if you look at it. Let's just take a look at GameStop, for instance. GameStop is, for lack of a better term, it's an antiquated model. It needs, it's a languishing business that doesn't have the path to growth set up. They don't have a good business plan or business model in place, and their stock was really down.
But there was a group, there was a group on Reddit called Wall Street Bets, and one guy in particular, Keith Gill, decided to start writing about how he was going to invest in it. And what happened is, through the discussion, through the zeitgeist, through the conversations, more people started talking about it, more people started
buying it. They started listening to him. What happens is it pushed the stock price up, but it pushed the stock price up because of emotions, because of speculation and no foundation in the business model, the business growth, the business plan, anything like that. And the problem is, is that a lot of people made money because that stock price went up to four over dollar, 400 a share, and then it tanked again. So a lot of people lost their behinds, big
time. Now, I'm gonna read a. A little bit of something that, that was posted by someone that was involved in it, because I want you to understand the impact of meme investing. Could you make money? Certainly you could. Is it replicatable? No. What? How do you make money? It's freaking luck. It's a gamble. You might as well go to Vegas, put it, put it all on black or red, spin the wheel and see if you win. Okay? That's not investing.
That's not even trading. It is speculation and gambling. Let's just talk about what happened to this, this guy. He posted this when it happened three years ago, but he said, he said, two weeks ago, I was sitting at lunch looking at $3,500 in my Robinhood account. Now, I have my qualms about Robinhood. We can talk about that in another video. But he said, I was frustrated that I had two stocks that
weren't well. So he says, I stumbled upon a Reddit post that started talking about GameStop and saying that it had potential. So first things first. Do not get your advice from a forum when you don't know the source, when you don't know what's going on. And you sit back and the person that is posting this stuff has a bias. He bought in, he talks it up. It goes up. He sells, he makes money. You get screwed in the long, in the long run.
Okay? Watch what happens. He said, I finally said, I said, screw it, and I took $3,500 and put it into GameStop. Okay, first things first. You don't go into investing saying, screw it, okay? The stock rose to $60. I found all of a sudden, he had $5,000. Okay, $5,000. And so he sat back and said, oh, this is going well. Something's happening. What does he do? He adds an additional $5,000 to his Robinhood account, thinking that it's going to explode. So Monday morning comes
along, and guess what? It starts to move. He called his financial advisor. He says, do me a favor. I want you to put $40,000 on gamestop. Okay? $40,000 of an inherited savings account. He got an inheritance of $200,000, and he took 40. He took 40,000 of the 200,020% of it. Put it in gamestop, okay? The stock went up. It went crazy. Went to $480 a share just in within a week. So all of a sudden, he's sitting on $200,000 in gains. He is looking good. His net worth is
now up over 400,000. Things are going well for him, but he figured it was going to go over $1,000 because that's what the people in Reddit were saying. It's going to go over $1,000. And they said, do not sell. No matter what, do not sell. The do not sell perspective, who is that help? Helps the people that got in first. Meme investing is no different than a pyramid scheme, and I think we need to be careful about it. On that Friday, that stock finished at $320 a share. He's still
way up. He's doing well. But in his mind, it's going to $1,000 a share. On what basis? The BUSINESS doesn't have growth. The business doesn't have the level of profitability to support it. Then Monday came. So that was Friday, 320 a share. Monday came, it starts to tank. Okay? Now Wall street bets and Reddit kept saying, nah, it's partisan manipulation. You're okay, you're okay. It stays in there.
It wasn't until it dropped into from $90 a share to dollar 50 a share that this guy decides to take it seriously, say, oh, my God. He says, I've made a mistake, y'all. He was up $200,000. He told his broker to put a stop loss in at 50, at $50 a share to sell half his shares. Lord knows why he would only sell half. Okay? And he's, he ends up at the end of that week, instead of being $200,000 up, he ends up $20,000 in the hole. In other words, $20,000 to the negative.
Here's the damage. Yes, there's financial damage, but the damage is that he's sitting back now and saying, I failed my wife. I failed myself. I'm an idiot. What does this do? What does this do? And more importantly, he said, even at the peak, at the peak, he didn't have in an inkling to think about selling because all he thought it was ever going to do is go up. But the fact is, it's a meme stock. It was being driven by an emotional element that was driving artificial demand, that
was driving prices up. It is not an investment. It's not replicatable. That was a couple of years ago. They just recently did it again. The same guy started talking. The stock price jumped to what? I'm looking at the chart now. Up $65 a share, it's down to 23. There's some people that made it because they bought low. They sold at 65. But there's a whole lot of people that just lost their behind again in it. You avoid meme stocks. We invest for the long
term. We invest in real companies. We invest in real business models. We invest in real business plans that have growth, have cash flow, and something that they can fall back on. All right? So that's number one. I went a little deeper on that one because it's really important, because it'll destroy you. It'll destroy you. It is the same emotions and the same elements that got me into the Ponzi scheme. It's the same thing. The same. I ignored logic. I
ignored the business model. I ignored understanding it. I ignored all of it. And I lost, I lost one third of everything I owned. Okay? Me and two other guys, we lost over four and a half million dollars. I don't want that happening to you. Eliminate it, simplify it, avoid it. If they're talking about it, it's probably too late. All right? We don't follow news. We don't follow memes. We don't follow fads and trends in that way
without analyzing it and critically asking some questions. All right, number two, to simplify things, stop paying bills manually. Just simplify it. Okay, I'm gonna put, so I, I try to automate all my bill paying, all my stuff automatically. I don't want any friction in and out of my bill paying and any managing of money. The more I can do this. Now, this goes back to also number three, I'm gonna talk about these together. Number three is automate investing. Take the thinking out of investing.
Take the thinking out of your bill paying. This is all about money management. I need money to pay bills. I don't want to be late on bills. I want to make sure my debt is taken care of. I also need the money. I want investing to be a priority. Remember, we earn, we invest, we pay bills that order. It's called the wealth
priority pathway. That's how we need to look at it. But the problem is, is that when there's friction, when I have to write a check or I have to push a button or I have to decide to invest or where to invest, that's friction. That gives kind of rise for the possibility of you falling, falling off the consistency wheel, that you don't continue to do it. So let's just automate all our bill paying as much as we possibly can. I have everything done online, okay? I do not, I very
rarely will write a check. I very rarely would do anything. It's automatic, automatic, automatic. More importantly, let's automate our investing. Automate our investing at the very beginning. Now we talk about it in the wealth priority ladder. In my book, building your money machine, is that the hierarchy and where you invest. But let's just, at the very beginning, if you are an employee and there's a 401K, okay, you should be participating in it, especially if your employer is doing
some sort of match. We want to capture the match, automate it. Tell your employer, let's do this and put the money away. That is what I mean by automation. You're not thinking about it. Now. There's two levels of automation here. One is you need to tell the employer to put it away. Okay? Two, you need to automate the investing of it. Because once it goes into the 401K, doesn't mean it's automatically invested, you need to invest
it. Same thing. If you don't have a 401k, maybe you have your own IRa or your Roth IRa or a sep IRa, same thing. Have your bank automatically transfer money into it on a weekly, monthly basis. However it is, just make it consistently and not have to have an effort with it. But once you make that transfer, you need a second automation, and that second automation is to have it invest automatically. And the way you're going to invest it is typically in one to four index, low
cost index, or ETF's. Easy peasy. Nice, nice and breezy. That's, I know that that's cliche, but what the heck? The fact of the matter is that I want it that simple, okay? When it's that simple, there's less likelihood that you're not going to do it. There's more likelihood that will continue to happen over time, because over time, that's how we build wealth. I want you to work from a long term perspective, which, which is number four, okay? Stop thinking short term,
okay? Your ability to build wealth, your ability to build wealth has to come from a simple portfolio over the long term. Simple portfolio over the long term. Think about this. The S and P over 100 years has returned about 10.9%. 10.9%, okay? If you look at a 20 year rolling time frame holding period, over any 20 year period, over any 20 year period, you, the minimum return you received was 4%, except for the great depression and recession, okay? But in any other 20 year period, the minimum rate,
there was nothing less than 4%. Okay? So we're investing for 20 years. The, the average, if we take it, if we take it out, can, can be 90% of the time at 8%. Okay. 59% of the time at 10%. Okay? My point being is that if you start looking at a decade or two decades from a time frame, your probability of success goes way up. Okay? We do not time the market. We do not try to play that game. We don't look at it and say, hmm, is the market too high? Maybe
I should get out. That's trading, that's not investing. And here's the facts. 84% of the big hedge fund traders, the sophisticated players, the ones with the big algorithms, the big computers, all the information, more than you and I put together, could ever have the best information over a 15 year period. Over 80% of them could not beat the market. They cannot consistently win. They can do it for a year, two years, maybe three years, but not consistently over a long period of time. So why are
we trying to do it. Get in the game, buy the market, stay in the game. S and P 500 will run and will consistently give us eight to 10%. Just think long term. Here's another reason why. If you miss out, if you try to time the market and you miss out on a couple of the big days, now, the big days are completely haphazard. We don't have any way of knowing when the big days are the best days in the market, okay? In fact, ten of the best days, ten of the best days in the market happened in bear
markets. So bear markets, meaning that the market's down, but ten of the best days happen in bear markets. In 2020. The second best day was immediately following the second worst day. So there's no rhyme or reason. Here's the thing that we need to understand. Let's assume that you put $10,000 in. I'm going to run this for you. If you put $10,000 in into an SPSP, okay? And you put $10,000 in, we'll talk about it from January zero three to, let's say, the end of December 22, 2022, okay?
So you put $10,000 in. If you just put it in and stayed in, it would, it would end up. If you had all the best days in the market, it would end up at about $65,000. Not bad. Okay. If you just missed, in other words, you got in and out, in and out. Because you were scared or because you were trying to time it and you weren't thinking long term and you missed, missed ten days. You missed ten days. Ten of the best days in the market, your return, instead of being $65,000, goes down to
about $30,000. You literally wipe out over half the return, you lose over 50%. That's why we got to stay in. Now think about this. If you were completely botched it, if you go completely wrong and you missed all of the good days, all of the best days, okay. All of the best days and you missed all of them, you would have a sum total of $4,000. Okay. Absolutely destroyed. The point is this.
I'm trying to make the point that when we get in investing, it is a long term game and it is a diversification game. So I'm going to buy a broad based ETF index fund, low cost, low fee. So I am across 500 to 3000 stocks. Some go up, some go down. But in the long term, based on historical performance, eight to 10%. And we just stay in the game and we're constantly buying. We're constantly getting in. Okay? So that leads me to number five, not focusing
on what matters. I get it. We're talking about money here, but we're really not talking about money. Money is a statistic. Money is a number in a bank account. Money is something, yes. We need it as a tool to pay bills, to do some things. But money itself isn't what we're after. It's the other stuff. And too often, we get so hyper focused on the money, on the data, on the statistics, the bank account, the size of the bank account, we lose
sight of what matters most. And this is why I look at it and I say to many of my clients and folks to say, when you create that vision for your life, when you create that vision that informs and creates a plan, I need you to then take that plan and make sure that that plan has in it some of those meaningful moments. What really matters, what I call joy points in life, if you do not have joy points along the path to financial freedom,
there will be no joy on the path to financial freedom. And if you don't enjoy the path to financial freedom, you will not enjoy the destination of financial freedom. And so what we really need to look at is say, what are the things that actually matter to me? Me. Because what matters to me doesn't matter. May not matter to you, okay, or the next person. What is it viscerally to you that really matters? Why are we doing this? What do we really want from
life? And what are the things that we truly, truly value versus momentary pleasures? The momentary pleasures are the things that we're getting marketed to on an ongoing basis. When we're comparing ourself to our neighbors, when we're comparing ourselves to what we see on Instagram or TikTok or the facades. And we're thinking of buying it. But it's not in the plan, it's not in the vision, it's not in the strategy. But we just decided to
change things because we looked at it and said, oh, that looks cool. But if that's not what truly brings you joy, why are we buying it? Why are we doing it now? I'm not saying not to buy something. I'm simply saying to be so intentional, so deliberate and so specific that you know what you're doing. Everything you're doing will support the vision you have for your life. The plan to get there, the strategy to make it happen, and the joy along the way. Because otherwise
it's an empty, empty journey. Because all we're doing is then solving a math equation to build wealth. Now, I can help you do that, but if there's no joy along the way, there's no fulfillment in the journey, no reason to do it if we do that. So with that, here's the things that I got to go back and tell you. Look, we want to keep it simple. Let's keep
things simple. Because if, the more simple we can make it, the more likely you're going to stay in the game, the more likely you'll be able to develop the habits, the more likely you will do this long term, and the more likely you will find your path to financial freedom. If you're trying to understand how to do it simply and all the processes, grab my book, building your money machine. Okay. You can go to yourmoneymachinebook.com to grab it,
but it's gonna break it down for you. It's gonna give you the process. It's gonna give you the frameworks. It's about being simple and effective versus complicated and sporadic. All right, so couple things to stop doing, avoid doing, or quit doing if you are. Let's go back to it. One is no longer. And avoiding fads, memes, or trends. We're not going to invest from that perspective. That's too emotional. It's speculation. It's gambling. Okay.
Stop doing things manually, whether it's investing or paying bills. Create an automated system that automatically pays bills, removes friction from it. Automatically invests, removes friction from it. So it's happening consistently. Think long term, get in the game, stay in the game long term. That's how you win and raise the probability of winning. And focus on what really matters. All right, I hope that this, you found this a value. I hope this starts to
simplify things on your financial journey. And if you have any questions or any thoughts, let me know, and I hope to see you on the road in another episode or out there while I'm speaking. All right? Until then, always, always strive to live a life that outlives you. Cheers. Thank you for listening to the affluent entrepreneurship.
With me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group, and I'll see you there.