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Have you ever met anyone that created wealth with stocks? I haven’t. Why not?  Inflation, emotion, taxes, fees and volatility are the reasons. I break this down. The Rule of 72 is what traditional advisers cite as a wealth-builder. I describe why this does not work. Learn why returns from stock and mutual funds are often less than zero. What really creates wealth? Leverage. Learn trade-offs between long-term rentals and short-term rentals. Zach Lemaster joins us. A licensed optometrist and captain for the US Air Force, he’s become financially-free through real estate.  We discuss the pros and cons of owning “Build-To-Rent” new construction income properties. It takes patience during the build process. Find Build-To-Rent income properties by e-mailing GRE’s Investment Coach: naresh@getricheducation.com Resources mentioned: Show Notes: www.GetRichEducation.com/399 Get income properties by e-mailing GRE’s Investment Coach: naresh@getricheducation.com When I interviewed the 401(k) inventor: https://www.getricheducation.com/episode/197-inventor-of-401k-ted-benna-joins-us/ Get mortgage loans for investment property: RidgeLendingGroup.com or call 877-74-RIDGE JWB’s available Florida income property: CashFlowAndGrowth.com To learn more about eQRPs: text “GRE” to 307-213-3475 or: eQRP.co By texting “GRE” to 307-213-3475 and opting in, you will receive periodic marketing messages from eQRP Co. Message & data rates may apply. Reply “STOP” to cancel. Make passive income with apartment and other syndications: www.imaccredited.com Best Financial Education: GetRichEducation.com Get our free, wealth-building “Don’t Quit Your Daydream Letter”: www.GetRichEducation.com/Letter Our YouTube Channel: www.youtube.com/c/GetRichEducation Top Properties & Providers: GREmarketplace.com Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold Partial transcript:   Welcome to GRE! Why Don’t Stocks Create Wealth? After answering that, learn about some tradeoffs between LTRs and STRs, and the pros & cons of getting a construction loan and new-build rental properties. Today, on Get Rich Education. ____________________   Welcome to GRE! From Hialeah, FL to Haleakala, HI and across 188 nations worldwide - that’s almost all of them - I’m Keith Weinhold. This is Get Rich Education.   I find it interesting that there are still smart people out there who think that stocks create wealth.   Everyday people could create wealth just by investing in stocks or mutual funds or ETFs?   I’ll tell ya. I have never met anyone in my entire life that has become wealthy from investing in these vehicles.   Now, that’s something that shouldn’t offend stock adherents. That has been my personal experience.    Just asking around here at GRE a bit, I found that our Content Manager, Matthew… he said that he once knew just one person that did get wealthy with stocks… and that is because that person’s company IPO’ed.   OK, well that’s worth knowing. But as for everyday investors, what one might call a retail investor that buys and owns Apple stock or Amazon stock or bought the S&P 500 Index fund from a big mutual fund company… I mean… do you know anyone that ever created wealth from stocks? Or do you even know anyone that ever knew someone that created wealth with stocks.   I'm talking about creating wealth. For example, someone that started at a level of either "just getting by" or starting at a level of "middle class" and then transitioned to "wealthy", simply through shrewd and savvy stock investing.   I think a lot of people invest in stocks just because that’s what the herd does.   But they never ask themselves at all… "Have I actually met anyone that's ever created wealth from stocks?"   And if you run with the herd, you don’t get ahead.   So why is this? How come virtually no one gets wealthy with stocks?   Well, look. We all learn and understand the world through different lenses. I'm about to share the thought paradigm that shifted my own personal journey… and why I have not personally - or through an LLC - or in any way, owned any stock, or mutual fund, or ETF since the year 2014.   Right now, major stock indices are flirting with bear market territory. This means a value loss of 20% from a recent peak.    Recently, the Dow Jones posted its eighth straight weekly loss. That's its longest weekly losing streak since 1923.   Could we say that misery loves companies? Big Tech has shrunk to Medium Tech. Even staid reliables like Apple, Target, and Walmart are tanking.     Other than a one-month virus "flash crash" in March of 2020, many Millennials and Gen Zers have zero experience with a sustained bear market.     None have occurred for thirteen years, which is an unusually long time frame.   Perhaps these investors will "sell low"; maybe they'll stay the course.   Now, investing in the stock market is so common - and so herdlike - that if you’re talking in a general conversation and say: “the market” - people just assume that you mean the stock market.   Well, shouldn’t “the market” be creating wealth for people.    After all, the S&P 500 has averaged a 10% annual return over time. In order to emphasize compounded returns, something that traditional, old school advisers often cite is "The Rule of 72".   You've probably heard of it.   What you do is take the number 72, divide it by your annual percent return (10), and that's how many years it takes your money to double.    Therefore, an S&P 500 investor should double their money every 7.2 years. Well, that sounds pretty good to most people..   Then over the decades, several doublings should ensure a fantastic retirement and perhaps even a taste of wealth.   But why doesn't it?   Why doesn’t it provide a fantastic retirement most times? And why doesn’t it put people on that wealthy echelon… ever?    This is due to five chief drags—inflation, emotion, taxes, fees, and volatility. I’ve glossed over that before. But lets see how this all negates what so many investors think is some kind of good return.     Let's subtract each one from this 10% unadjusted stock return.   Inflation Many experts agree that the CPI, currently 8%+, understates the true rate of inflation. It could be 15% now.   But let’s just say that long-term, true inflation averages 5%.   Yes, you could make the case that it’s more. But let’s just use 5% inflation. Well then...   …your long-term 10% stock return minus 5% inflation = 5% inflation-adjusted return.   Emotion Everyone knows you're supposed to "buy low" and "sell high". But many do the opposite.   Why?   One has difficulty buying low because prices have often fallen for a long period of time before the dip. The predominant emotion is discouragement.   When stock prices have gone down, down, down, like they have this year, so many people get emotional and sell low… and they justify that by saying… I’m sick of losing money… and if I sell, I guarantee that I’ll stop losing money. So many sell low.   But on the flip side, why isn't everyone selling high? It's because prices have grown. It's hard to sell out of upward momentum. Up, up, up, up, up, friends are making money. You’ve got FOMO. This emotion is euphoria. This makes people buy - maybe not at the peak - buy they often buy higher that what they sold for.   But despite all this, most people believe that they're above-average investors—despite the statistical impossibility. This effect is called illusory superiority.   It's like how 7 out of 10 people believe that they are above-average drivers.   People often sell lower & buy higher.   We'll just say this takes one's 5% inflation-adjusted stock return down to 4%. That's being kind.   Taxes & Fees Long-term capital gains taxes start at 15%. The highest ordinary income tax rate is 37%, which is the short-term capital gains tax equivalent.   Those percentages are what get taken out of your profit - that’s what eats into the entire 10% return that we started out with here.   Even if your funds are sheltered in a 401(k) or many retirement account types, yes, you could get tax-deferred growth. But you must begin paying taxes in retirement.   Fees are something that vary quite widely.   So… an S&P 500 investor's return adjusted for: inflation, emotion, taxes, and fees is often below 2%. Maybe far below 2%.   We're not done.   Volatility So many people miss this.   The Rule of 72 and other projections are based on a fixed annual rate of interest.   It's called the compound annual growth rate (CAGR).   Our example… with this Rule Of 72 assumed a smooth, exact 10% return every single year.   This is irresponsibly quixotic. The real world doesn't work this way.   Let's say that a price falls 20%—which again is a bear market. Now, you must gain 25% to get back to "even". That's just math.   Now, if it falls 40%, it must gain 66.7% just to return to sea level.   Using a smoothed CAGR diminishes the damaging effect of return volatility.   So let's take our 2% return that's already been adjusted for: inflation, emotion, taxes, fees. Now subtract out this volatility.   And now, you can see why real rates of return are often less than 0% for stock, mutual fund, and ETF investors. Maybe they’re minus 3%. Maybe they’re minus 12%.   Real stock returns often crumble faster than a Nature Valley granola bar. They're not good for you either—full of sugar and canola oil.   Note that I even used what many consider "good times" in my example—where we started with a 10% unadjusted return.   This is an audio format here on GRE Podcast Episode #399 so my analysis wasn't deeply technical nor replete with formulas for pinpoint accuracy.   You might remember when we had Garrett Gunderson here on the show a few times. He really goes deep on how stock & mutual fund investors typically lose prosperity year-after-year and Garrett thinks that I’m being kind when I say that a stock investor’s real return is “0”.   It helps you begin to understand why you rarely—if ever—met anyone that acquired we