Courtesy of Ramit Sethi
Ramit Sethi.
- Ramit Sethi is the author of the New York Times bestseller, "I Will Teach You To Be Rich."
- People come to him for stock advice, and he finds that, no matter the stock, his advice is always the same: You're probably getting ahead of yourself.
- That's because he finds the vast majority of people debating which stock is the best don't have the strong personal finance foundation they need: a diversified portfolio, an emergency fund, completely funded tax-advantaged accounts.
- If you do have a strong personal finance foundation, he says, go ahead and put some money wherever you want.
Here's a common scenario: You read about a hot company that's doing really well and now you're wondering, "Should you invest in the stock to get RICH?"
Even now my friends like to link me to research reports on how companies are doing. A recent one talked about a little-known company I won't name.
This research report indicated that the company is now the cool kid on the block and even has headlines that implied it has become the most important story in retail - a real trophy asset!
If you believed the report and were looking for a stock to invest in, your eyes might bulge out and you'd feel the urge to invest in this stock.
But let me tell you what an experienced investor would say about this:
HELL NO!
All these people who ask "Should I buy this stock" or "What about bitcoin or ICOs?" have a little dirty secret …
THEY DON'T EVEN HAVE A PORTFOLIO.
They don't know what the hell they're talking about.
Because if you already had a truly diversified portfolio ...
... if you were maxing out all your tax-advantaged accounts …
... if you had AT LEAST six months or more in an emergency fund and already had your down payment all saved up for a future house (here's how to save for a house) …
... if you had ALL that already and you have play money leftover, then OK - take five to 10% of your money and go NUTS. Invest it in an individual asset like a stock or even bitcoin or whatever - be my guest!
But the vast majority of people do not.
Read More: My portfolio just lost $75,000 in 12 days - here's why I'm not worried at all
So if you don't have all those things and you focus on individual "hot" stocks, that's how you lose.
Don't do it. Instead, diversify your portfolio, automate your finances, and move on with your life.
I have tons more to say on this topic and other insider techniques on boosting your salary, making smarter investments, and earning more money at my "I Will Teach You To Be Rich" newsletter. Sign up to join 400,000+ readers.
Ramit Sethi is the author of the New York Times bestseller "I Will Teach You to Be Rich" and writes for more than 1 million readers on his websites, I Will Teach You to Be Rich. He's been featured on The Wall Street Journal, CNBC, The New York Times, and more. Sign up here to see why 400,000+ readers LOVE his personal finance advice.