Personal finance expert Ramit Sethi outlines five widespread investment strategies that offer little to no long-term returns, warning investors to avoid pitfalls such as overpaying for financial advice and chasing speculative assets. The analysis underscores the importance of cost efficiency and discipline in building sustainable wealth.
- Overpriced financial advisors charge an average of $2,000 annually, with performance lagging low-cost index funds by 2.5%–3.7% yearly.
- 87% of investors in speculative crypto and meme stocks lose money within one year, averaging losses of $7,500.
- Investments with fees above 1.00% are discouraged unless they consistently outperform benchmarks.
- Sethi advocates allocating 90% of portfolios to index funds and ETFs with expense ratios under 0.10%.
- Emotional investing and chasing trends lead to systematic underperformance across asset classes.
- High-fee platforms and speculative assets are increasingly viewed as unsustainable wealth drains.
Ramit Sethi, a prominent figure in personal finance education, has spotlighted five investment traps that he describes as 'complete wastes of money.' These strategies, while commonly promoted, fail to deliver meaningful returns and often erode investor capital through high fees and emotional decision-making. The list includes overpriced financial advisory services, speculative cryptocurrency holdings, overfunded retirement accounts beyond tax-advantaged limits, expensive robo-advisory platforms with opaque fees, and investments in 'hot' trending stocks without fundamental analysis. The core issue, Sethi argues, lies in the misalignment of incentives and lack of measurable outcomes. For instance, he cites that the average investor pays over $2,000 annually in advisory fees for services that underperform low-cost index funds by 2.5% to 3.7% per year. Similarly, he notes that 87% of individuals who invest in meme stocks or crypto assets with no intrinsic value lose money within 12 months, with average losses exceeding $7,500 per investor in high-frequency trading scenarios. Sethi emphasizes that true wealth accumulation stems from disciplined behavior, low-cost vehicles, and long-term consistency rather than chasing novelty or paying for perceived expertise. He recommends allocating 90% of portfolios to low-fee index funds and ETFs with expense ratios below 0.10%, avoiding any investment with fees above 1.00% unless backed by verifiable, outsized performance. The implications extend beyond individual investors—financial institutions and platforms that promote these traps may face reputational risks as awareness grows. Investors seeking to optimize returns are increasingly prioritizing transparency, cost efficiency, and evidence-based strategies, shifting capital away from high-fee products and speculative markets.