A Smart Way to Manage Your Own Money

The life of a day trader... The FinTok phenomenon... Moved back in with his dad... 'Where are the customers' yachts?'... High fees and bad advice... Democratization of trading... A smart way to manage your own money...

We had a shot to fix finance...

But we missed it.

Instead, we got this... a 45-second video titled "An Average Monday of Any Stock Trader 💹 🏅."

Here's how the day goes...

You begin the morning doing a little work... staring at four trading screens with your feet up. Then, you choose whether to drive your Ferrari or your Bentley to the beach club, followed by a cruise on a yacht with friends.

Later in the day, you do some watch shopping, make a couple TikTok videos, then have dinner, served by your personal butler, by the pool...

This is one of thousands of similar videos you can find on "FinTok" – a community that has sprung up on the social media site TikTok that offers tips and tricks to get rich quick...

Of course, little of it qualifies as anything of substance.

In fact, most of FinTok is hype... It shows clips of kids who look 17, standing in front of digital backgrounds of six trading screens, acting as if it's their real work environment.

Then they go "supercar" shopping...

Others share photos of themselves on private jets... but those are likely taken on studio sets that you can rent for Instagram photo shoots.

When the FinTok videos do discuss finance, the facts are dead wrong...

One famous FinToker revealed his system in a video. Standing next to his wife or girlfriend, he explains...

Here's my strategy in a nutshell. I see a stock going up, and I buy. And I just watch it until it stops going up, and then I sell it. And I do that over and over, and it pays for our whole lifestyle.

Thanks for the tip.

Others started sharing the "advice" that if you set up an S corporation, you don't have to pay taxes... There is no need to explain the reasons why, but nothing about that advice is true.

Another has built a following claiming that maxing out a 401(k) is the dumbest thing you can do with your money.

I (Matt Weinschenk) am a professional equity analyst... and my day involves a lot more spreadsheets than these FinTok jockeys seem to deal with... And as I said, we almost fixed finance in America. However, this is where we ended up.

But it's not all bad. No, in fact, I will share a smart way to manage your money in today's Digest...

Before FinTok, Wall Street was the villain...

Wall Street has long been vilified as a scheme for turning ordinary people's money into investment bankers' wealth, perhaps best encapsulated in the anecdote that starts Fred Schwed's 1940 book subtitled A Good Hard Look at Wall Street...

An out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor.

He said, "Look, those are the bankers' and brokers' yachts."

"Where are the customers' yachts?" asked the naive visitor.

And Wall Street partly deserved the derision... for commanding huge fees and providing bad advice.

While the credit provided by the financial system is a key factor in America's incredible growth story, the bankers sure know how to capture themselves a fee.

For decades, we saw individual investors paying 2% and 3% annually on the amount of their money their broker held under management... plus front-end loads (or payments) for mutual funds that lagged the markets.

We saw brokerage commissions of more than $50 a trade and demands to trade round lots of 100 shares... We saw complex financial instruments designed to hide the fees from confused customers.

Starting in the mid-1990s, we saw a democratization of investing ‒ 401(k)s became mainstream, allowing savers to control their own retirement accounts. Online discount brokers cut commissions to $10 or less... Internet sites began to provide instant and trustworthy financial data, rather than waiting for research to arrive by mail.

That wave of instant, widely accessible financial information inspired an army of day traders who drove the dot-com boom. But like today's FinTokers, they got intoxicated by some easy money... The bubble burst... The traders, for the most part, went away.

Following that bubble, everyday investors started to understand the power of index funds. Index funds deliver an aggregated market return for drastically lower fees... From 2000 to 2010, the assets in index funds more than quadrupled... and then quadrupled again from 2010 to 2020.

That meant no more fees for underperformance or high front-end loads on mutual funds... And with a simple exchange-traded fund ("ETF") portfolio, investors didn't need to pay expensive advisers.

This wave of democratization didn't last either...

It turns out that people aren't satisfied with just "average" returns... While index funds are still popular, people are increasingly getting into active investing.

That coincides with efforts from financial technology (fintech) companies to democratize finance even more... Led by Robinhood Markets (HOOD) and other brokerages, trading commissions have been cut to zero, and margin lending is widely available.

It seemed an admirable goal, but it turned investing into a game... And this "gamification" of trading led people to overtrade.

Then a confluence of events kicked it into overdrive...

First, the market kept rising and rising, drawing in more participants.

Second, the pandemic kept people locked at home with plenty of time to play the market... And play they did.

Third, cryptos and non-fungible tokens (NFTs) exploded... becoming so popular that it became normal, leading more people to feel that financial speculation was the way to get rich, because everybody's doing it.

All this together has led to an entire class of individuals under-researching, overtrading, and winning and losing vast sums of money.

Alongside the FinTok "stars" showing off rented wealth, you can watch videos of blowups... screenshots of accounts that lost six figures in a day.

We followed one FinToker who posted a mesmerizing tale over several months... He quit his job and put all his money ‒ all his savings and IRAs ‒ into bitcoin... (I'd argue that he could have kept his job and still bought bitcoin, but let's not go there.)

Bitcoin fell and he took a big loss... He started using trading coaches he discovered on social media. They suggested using leverage to earn back his losses. But even though bitcoin is up over the last year, leverage can work against you, even if an asset goes up... He got wiped out.

He moved back in with his father at age 45 and got a job as a waiter... And there are similar sad tales out there like this one.

America broke free of Wall Street's fees... and left behind the level-headed guidance those fees brought with them.

So who should manage your money in the 2020s?

The answer is somewhere between Wall Street's exorbitant fees and the hubris of a 20-year-old whose advice is to sell when the stock stops going up...

The big banks billed themselves as trusted institutions, but they shattered their reputations when the federal government had to bail them out during the financial crisis in 2009.

The financial crisis also revealed that the banks had leveraged the trust they established with customers to peddle risky investments and hide unnecessary fees.

And I don't think I need to explain why you shouldn't trust FinTok...

There is a better way...

Stansberry Research can help you invest your money on your own... providing a source of information that you can trust.

Porter Stansberry set out to fill this gap in 1999. He knew that Wall Street wasn't working and that investors wanted more control. They just didn't know how... And they didn't know who they could trust.

Porter wanted to find a way to guide investors with information they knew was legitimate and with ideas that included all the research needed to convey the risk, rewards, and how a certain investment decision fits in their financial picture.

If you combine the tools of modern finance – low commissions, abundant information, and low-cost ETFs – and pair them with solid, independent research... you have found the secret sauce of smart, self-directed investing.

Stansberry Research is set up to succeed only if our readers find value in our research... If subscribers trust us, they stay with us for years.

Fortunately, we've been able to do that by amassing more than 500,000 subscribers in various publications... many of whom have added lifetime subscriptions or signed up for multiple products.

Finance will continue to change, and Stansberry Research will change along with it...

If you told me in 2015 that in 2021 we'd have multiple research services focused on cryptocurrencies, I would have gotten a good laugh.

But we found a true crypto expert in Eric Wade, who now oversees Crypto Capital and Crypto Cashflow... And his services have delivered incredible returns to readers – including 28 closed positions (or partial positions) that doubled or more – all while keeping readers informed on the risks of cryptocurrencies...

As I said, Stansberry Research has grown along with the needs of its readers... In fact, this year alone we added five new research services to help readers navigate financial markets on their own.

In October, we launched Matt McCall's MegaTrend Investor, which seeks out stocks that will lead the hypergrowth decade ahead that Matt calls the Roaring 2020s... Mike Barrett released his 10x Investor service to lock you into hypergrowth stocks at the beginning to avoid missing the early gains... Those are just two examples. There are numerous other services and publications that Stansberry has created recently to adapt to the ever-changing world of investing...

If you're looking for more guidance on how you can take better control of your investment destiny, we urge you to check out our special end-of-year broadcast this Wednesday...

We'll discuss some important changes we've made to our business... and discuss how it could all benefit you personally... Plus, we will detail how you can take advantage of one of our most generous offers ever.

If you recognize the value of our research and want to play a bigger role in our business, you owe it to yourself to tune in for this event. But don't delay... Sign up here now ‒ and then tune in this Wednesday, December 15 at 9 a.m. Eastern time.

As part of Stansberry Research's special holiday broadcast, we'll reveal a secret only the top 1% of our readers understand... Something many of them have told us helped them amass enormous wealth.

New 52-week highs (as of 12/10/21): Apple (AAPL), AbbVie (ABBV), Costco Wholesale (COST), Cintas (CTAS), CVS Health (CVS), Eagle Materials (EXP), Expeditors International of Washington (EXPD), General Mills (GIS), W.W. Grainger (GWW), Hershey (HSY), iShares U.S. Home Construction Fund (ITB), Lennar (LEN), McDonald's (MCD), Martin Marietta Materials (MLM), Motorola Solutions (MSI), Nestlé (NSRGY), NVR (NVR), Procter & Gamble (PG), ProShares Ultra S&P 500 Fund (SSO), Trex (TREX), Vanguard S&P 500 Fund (VOO), Consumer Staples Select Sector SPDR Fund (XLP), and Zebra Technologies (ZBRA).

It was a quiet weekend in the mailbag. Is everyone busy celebrating the holiday season? As always, we love to hear your thoughts on the markets at feedback@stansberryresearch.com.

Here's to smart investing,

Matt Weinschenk
Baltimore, Maryland
December 13, 2021