When Investing, Trust No One
Many people have lost fortunes because of bad financial decisions.
Dear Jeanie,
At some point in your life, someone is going to pull you aside at a dinner party, a family gathering, or a casual night out and tell you about the most amazing investment opportunity you have ever heard of. It might be a friend raving about their financial advisor who is absolutely crushing it in the market. It might be a cousin who just got into crypto and cannot stop talking about how much money he is making. It might be a college friend who is launching a startup and wants you in on the ground floor, or someone you barely know pitching you on a restaurant, a rental property, or some other business venture that sounds almost too good to be true.
And here is the very first thing I need you to do in every single one of those moments. Trust no one.
I know that sounds harsh. But please hear me out, because this is one of the most important financial lessons I can ever pass on to you. People lie about money all the time. Sometimes they lie deliberately because they are desperate to keep a failing project alive before it collapses entirely. Sometimes they lie because greed has completely clouded their judgment. And sometimes they do not even realize they are pulling you into something that is slowly unraveling right underneath their feet. I have seen every version of this story play out, and it rarely ends well for the person who said yes.
Do you remember what I told you in the last letter about keeping your finances private? This is exactly why. The moment people know you have money saved, some of them will want a piece of it. And they will have a very convincing story ready for you when they come asking.
Here are the red flags I need you to always remember.
Do Not Invest in a Family Business
This is a hard no. I do not care how solid the idea sounds, how close you are to the person, or how sincerely they promise you it will all work out. Money has a way of destroying family relationships in ways that almost nothing else can. Once things go wrong, and they often do, you will not just lose the money. You will lose the relationship too. I have watched cousins stop speaking to each other, siblings go years without any contact, and family gatherings turn cold and uncomfortable because someone said yes to a business deal they never should have touched. Do not put yourself in that position. The answer is simply no.
Do Not Invest With Unvetted Financial Advisors
I know they sound professional. I know they use impressive language about fiduciary responsibility and working exclusively in your best interest. But here is what many of them will not tell you upfront. They earn commissions on your money, and those commissions come straight out of your account whether you make money that year or lose it. That fee is usually around two percent, which does not sound like much at first. But as your account grows into the hundreds of thousands of dollars over the decades, that two percent becomes an enormous sum paid directly to them, year after year, for the rest of your investing life.
And the fiduciary promise often has a significant catch buried inside it. Many of these advisors will ask you to transfer all of your investment accounts and retirement funds over to them, and then quietly move everything into their own proprietary funds where their fees could be the highest. They are not working in your best interest. They are working in theirs, and your money is simply how they do it.
And please, do not be fooled by appearances. I need you to understand this one clearly because it catches so many smart people completely off guard. Just because a financial advisor works out of a luxurious office in a prestigious building does not mean your money is safe with them. Just because they live in an incredible mansion, drive exotic cars, wear expensive clothes, and project every outward sign of extraordinary success does not mean they are legitimate. In fact, sometimes it means the exact opposite. That lavish lifestyle has to be paid for by someone, and more often than you would ever want to believe, it is being paid for by their clients. The high commission fees they quietly pull from your account every single year, multiplied across hundreds or even thousands of investors, can fund a remarkably impressive life for someone who is essentially living off other people’s money. And in the worst cases, that spectacular lifestyle is not being funded by smart investing at all. It is being funded by a Ponzi scheme, where money from new investors is used to pay earlier ones just long enough to keep the illusion alive. Bernie Madoff had one of the most respected names on Wall Street. His offices were immaculate. His reputation was impeccable. And he stole billions of dollars from thousands of people who trusted him completely. The office, the cars, the wardrobe, none of it means anything. Do not let it impress you. Do not let it reassure you. Let it make you more careful, not less.
There is also the very real risk of outright fraud. There are entire television shows and documentaries dedicated to financial advisors and wealth management firms who turned out to be running Ponzi schemes. It happens far more often than most people realize, and the victims are almost always people who trusted someone who seemed completely legitimate on the surface.
Do Not Invest in Restaurants, Bars, or Nightclubs
These are among the most dangerous investments you can make. The restaurant industry has one of the highest failure rates of any business that exists, and even the ones that manage to survive are almost always money pits that constantly need more cash to keep going. Equipment breaks down. The space needs to be renovated every few years just to stay fresh and relevant. Profit margins are razor thin on the very best of days. And one bad season, one difficult stretch of slow business, or one string of bad reviews online can wipe everything out in a matter of weeks.
There are a handful of extraordinary operators in the restaurant world who truly know what they are doing, and they know it because they have spent twenty years or more mastering every single part of this business from the inside out. But even when you encounter someone like that, my advice is to wait until you have already paid off your home, fully funded your retirement, and set aside your children’s college education before you even consider it. Not a moment before.
Do Not Invest in Movies, Documentaries, or TV Pilots
Filmmakers are gifted storytellers, and that gift is part of what makes them genuinely dangerous to invest with. Independent filmmakers and producers will paint you a picture of Sundance or Tribeca festival premieres, distribution deals, and their film changing the cultural conversation. And many of them believe every single word of it.
But passion and glamour do not pay your investment back. Most independent filmmakers and producers have little to no understanding of how to market, distribute, promote, or generate a real return for their investors. I have personally seen people take out second mortgages on their homes to fund someone else’s film project and never see a single dollar back. The industry even has a name for people who hand over money to these projects. They call them fool’s gold investors, naive people whose money gets used up with nothing to show for it. And Hollywood has an entire accounting system, so well known that it has its own Wikipedia page. Stay far away from this one.
Be Very Careful With Rental Properties and Multifamily Investments
Real estate can be a legitimate long term investment, but it is nowhere near as passive or as simple as the people pitching it will make it sound. And I want to walk you through the real picture here, because the people selling you on this idea will never do it honestly.
Properties break down constantly, and the repair bills are far larger than most new landlords ever anticipate. A central air conditioning system replacement can run anywhere from eight thousand to fifteen thousand dollars or more depending on the size of the unit and the property. A roof replacement on a single family home can easily cost ten to twenty thousand dollars. A water heater, a broken furnace, a failed electrical panel, a plumbing emergency at two in the morning, none of these things ask for your permission before they happen, and every single one of them is your financial responsibility as the owner. Appliances fail. Flooring gets damaged. Paint peels. And as a landlord, you are legally required to maintain the property in habitable condition regardless of what is happening with your own finances at that moment.
But the repair costs from normal wear and tear are almost manageable compared to what can happen when a tenant leaves a property in truly bad shape. And Jeanie, it happens more often than you would ever want to believe. I have seen landlords walk into a unit after a tenant moved out and find walls punched through, carpets destroyed beyond any cleaning, kitchens left in conditions that are genuinely difficult to describe, bathrooms that required complete gut renovations, and damage so extensive that the property could not be shown to a single prospective tenant until tens of thousands of dollars in repairs were completed. The security deposit, which is almost never enough to cover the real cost of that kind of damage, gets eaten up in the first afternoon of contractor estimates. Everything beyond that comes directly out of your pocket. And while you are spending weeks or months repairing the property before you can rent it again, you are also earning zero income from it while your mortgage, taxes, insurance, and utility costs continue without a single pause.
Then there is the squatter problem, which is one of the most financially devastating and emotionally exhausting situations a property owner can face, and almost nobody warns you about it until it has already happened to them or someone they know. A squatter is someone who occupies your property without your permission and without paying rent. And before you assume that sounds like something easily resolved with a phone call to the police, let me tell you how it actually works.
In many states across this country, squatters have extensive legal protections that make removing them a long, complicated, and extraordinarily expensive process. You cannot change the locks. You cannot shut off the utilities. Doing either of those things can actually expose you to legal liability and make your situation significantly worse. Instead, you are forced into the formal court eviction process, which depending on the state and the local court system can take anywhere from several months to well over a year. And during every single day of that process, you are paying your mortgage, your property taxes, your insurance, and all of your operating costs on a property that is generating absolutely no income for you whatsoever.
And here is the part that genuinely shocks most people when they experience it for the first time. After going through months of grinding legal proceedings and accumulating thousands of dollars in attorney fees, many landlords end up paying the squatter a cash settlement just to get them to leave voluntarily. It sounds outrageous, I know. But it is an extremely common outcome, because fighting the case all the way through the courts can cost even more in legal fees and lost time than simply offering a payment to make it end. Attorneys who work in this space even have a name for it. They call it cash for keys. You end up paying someone who was never supposed to be there in the first place just to get your own property back.
By the time a squatter situation is fully resolved, between the months of lost rental income, the attorney fees, the court costs, and a potential settlement payment, you can easily find yourself out twenty thousand, thirty thousand dollars, or more on a single property. And if you own multiple units, that risk multiplies at every door.
This is not a worst case scenario I am describing. This happens to property owners across the country every single day. And it is one of the many reasons why rental property investing is far more complicated, far more expensive, and far more emotionally draining than anyone trying to sell you on the idea will ever honestly admit.
If you are investing alongside someone who does not have at least twenty five years of proven, hands on experience as an actual property owner through multiple economic cycles, you are absorbing enormous risk for someone else’s education. And that is a price that is simply not worth paying.
Do Not Invest in Franchises Without Deep Experience
Franchises are often marketed as turnkey businesses, a recognizable brand, a proven system, and a ready made model handed directly to you. But the reality is that franchisors make most of their money on the initial franchise fee and on the ongoing royalties and operational fees they collect from you regardless of whether your specific location is profitable. Before you ever consider a franchise, you need to be a genuine expert in that industry, not just interested in it, and you need a capable team around you who knows every detail of that business inside and out.
Do Not Invest in Startups
If someone tells you that if they can just capture one percent of the market they will make you both rich, please smile politely and change the subject. Most startup founders, no matter how brilliant or enthusiastic they genuinely are, completely underestimate how much money it actually takes to build a real company. They miscalculate everything. They do not have the right financial team, the right product, the right sales strategy, or the financial discipline required to survive. And the stock options or co-founder title they are dangling in front of you are almost certainly worth nothing. Walk away unless that founder has already taken multiple companies public and kept them trading successfully in the stock market for at least seven years. That is the only version of that story worth listening to.
Do Not Invest in Crypto
I need you to hear this one loud and clear, Jeanie. I do not care if someone shows you a chart where Bitcoin doubled or tripled in value overnight. I do not care if your coworker is bragging about how much money they made last month. I do not care how many headlines you see about crypto millionaires. Do not do it.
Here is what nobody ever slows down long enough to explain to you. Crypto has zero consumer protection behind it. None. It is not regulated by the SEC the way stocks and traditional investments are. Your money is not protected by the FDIC the way it is in a bank account. There is no physical office you can walk into if something goes wrong. There is no customer service phone number you can call when your account is frozen, hacked, or simply gone. And these things happen all the time. Crypto exchanges have collapsed overnight, taking billions of dollars in ordinary people’s savings with them and leaving their customers with absolutely no legal recourse and no way to recover a single dollar. When they disappear, and some of them do, you are done.
And here is the part that the people celebrating their paper gains never want to talk about. Seeing your crypto double or triple in value on a screen means absolutely nothing until you actually sell it and have real money sitting in your real bank account. That is when the fees hit. That is when the taxes hit. Because the IRS treats crypto gains as taxable income, and depending on how long you held it and what tax bracket you are in, a very significant portion of what looked like a windfall suddenly belongs to the government. By the time you subtract the transaction fees, the platform fees, the capital gains taxes, and any state taxes on top of that, the profit that looked so impressive on paper can shrink down to something far less exciting in reality.
So do not get distracted by the price going up. What matters is what you actually walk away with after every fee and every tax has been paid. And with crypto, that number is almost always smaller and far less certain than anyone bragging about their gains at a dinner party will ever admit to you.
Crypto is volatile, unregulated, unprotected, and genuinely unpredictable in ways that no other mainstream investment comes close to matching. It is not worth your hard earned savings. It is not worth your peace of mind. And it is not worth the very real risk of losing everything with zero ability to fight back or recover what you lost.
Stay away from it entirely.
Do Not Even Think About Day Trading
If someone ever tries to talk you into day trading stocks, I want you to do one thing and one thing only. Run. Do not walk. Do not entertain the conversation. Do not ask questions about how it works. Just turn around and run in the opposite direction as fast as you possibly can.
There is a famous scene in the film The Wolf of Wall Street where a character named Mark Hanna, played brilliantly by Matthew McConaughey, lays out the truth about Wall Street in a way that no finance professor, no broker, and no investment seminar will ever say out loud. He calls it all fugazi. Fairy dust. Something that looks real, gets talked about like it is real, and gets traded like it is real, but at its core does not actually exist in any tangible or guaranteed form. And then he says the most honest thing anyone in that world has ever admitted on screen. Nobody knows if a stock is going to go up, down, sideways, or in circles. Not Warren Buffett. Not the smartest analyst on Wall Street. Not the guy on YouTube with the fancy charts and the confident voice telling you he has cracked the code. Nobody knows. And least of all the brokers and day traders who are betting your money on guesses dressed up to look like strategy.
Day trading is not investing. It is gambling with extra steps and a much more expensive learning curve. People who day trade are essentially sitting in front of screens all day long making rapid fire decisions about buying and selling stocks based on short term price movements, trying to time the market perfectly on every single trade. But the reality is that a large portion of day traders lose money. Not a little money. A lot of money.
So no matter how confident someone sounds, no matter how impressive their short term results look on paper, and no matter how many people in an online forum are talking about their winning trades, remember what Mark Hanna said. It is fugazi. It is fairy dust. Nobody truly knows. And you could lose everything you worked so hard to save overnight on a single bad trade that felt absolutely certain just hours before it collapsed. Just run away from this one entirely.
The Pattern Behind All of This
Here is what I need you to see. In almost every single one of these situations, the person asking for your money is a rookie in their own field. They may be enthusiastic and likable and completely convinced they are going to make it. But enthusiasm is not the same thing as experience. Real experience means having successfully built and operated something for at least twenty years, not as an employee or a consultant, but as the person who actually owned it, ran it through good times and bad, and delivered real returns to the people who trusted them with their money.
Do Your Due Diligence Before You Ever Write a Check
If you ever find yourself seriously considering an investment, here is exactly what I need you to do before anything else. Audit everything yourself, and then bring in a trusted business consultant that you have independently selected who is an expert in that specific industry, along with a qualified CPA and a trusted lawyer to review all paperwork. You need full access to their financial statements for the last ten years, their profit and loss reports, balance sheets, statements of cash flow, their debt levels, all of it. If they tell you that information is private, offer to sign a nondisclosure agreement. If they still refuse after that, you have your answer right there. Something is wrong and they do not want you to find it.
Also request to speak privately with every current investor before you commit a single dollar. Ask them directly how the business is really performing. Ask how much they have invested, whether they have recovered any of it yet, when they realistically expect to see returns, and what the current obstacles and challenges are. Their answers will tell you more than any polished pitch deck ever could.
At the end of the day, investing in low cost index funds through the stock market remains one of the most reliable and time tested ways to build real wealth over the long run. It is not exciting. It is actually quite boring. It will never make for a great story at a dinner party. But it works consistently, and it will not cost you a friendship, a family relationship, or years of hard earned savings that took you a lifetime to build.
Be careful out there. Do not let greed or guilt drive your financial decisions. Do your homework every single time. And when something feels off, trust that feeling completely.
Love, Dad.