Before Ramit Sethi became known for telling people how to build wealth, he learned one of his first investing lessons the expensive way.
Sethi grew up in a California middle-class family and knew that if he wanted to go to college, scholarships would have to help make it happen. He earned them, and when one scholarship sent him a $2,000 check, he decided to do something that probably felt very grown-up at the time: invest it.
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There was just one problem. He didn’t really know what he was doing.
“I lost half my money within a matter of months,” Sethi said in an interview with Mainstreet. “I was just putting it in whatever company I thought was going up and down a lot.”
For a college student, that was an expensive price to pay for an investing mistake. But here’s what he learned from it.
Simpler than it seems
Losing half of that $2,000 could have been enough to scare Sethi away from the stock market. Instead, it made him want to understand what he had gotten wrong.
It became the drive to learn more about personal finance and investing before risking all his money, and what surprised him was how much simpler it was than the first time.
“I didn’t realize investing is much more than just picking whatever company you think is cool and then putting a bunch of money in it,’ Sethi said.
His early mistake is a familiar one. New investors can easily mistake activity for strategy, chasing stocks that are moving quickly or getting attention rather than thinking about what their money could do over the long term.
“Instead of treating financial markets as long-term compounding machines, inexperienced investors treat them like lottery tickets,” Jonathan Carcone, principal of 4 Brothers Buy Houses, told Moneywise. “They are swept up by the positive buzz created by other investors and buy a stock at an all-time high only to dump it at the first decline.”
That long-term approach is something Sethi has emphasized himself. In a 2024 interview with Moneywise, he called compound interest a “secret weapon,” recalling that he started investing around age 14 and watched even small amounts grow over time.
