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How to Retire Early: The Latte Factor

Lesson 14 of 18

Reasons Most Investments Fail


How to Retire Early: The Latte Factor

Lesson 14 of 18

Reasons Most Investments Fail


Lesson Info

Reasons Most Investments Fail

one of the reasons that most investors failed because the truth is that most investors don't do nearly the job that they shouldn't dio when it comes to their money. So Number one is that they try to time the market, and I'm gonna show you what this means the second. But they try to time the market. They wait to invest, they procrastinate the same too busy. They don't save enough or they take too much risk like those of the four primary reasons that investors failed in my opinion. So let's go to number one trying to time the market. What does it mean to time the market? How many of you have ever been in the lane? You're in your car, you're in the lane and sure enough, the lane stops, right? So what do you dio? You switch lanes and then sues you switch lanes. What happens last up and the other land goes right by. This happens in grocery stores, right? This I mean, this happens in ski lines. Inevitably, the moment you switch in line, somehow the line universe knew it and then it stops it,...

right. Well, the funny thing is, in the market similar. So I'm going to show you this month. This is a chart you can't read. It's intentional. But what this chart shows you is that it shows the stock market from in 18 97 to this case 2016. So, baby, 20 years of data it shows the top performing investments all the way to the bottom performing investments. I am at the top. First of all, let me ask a question. Do you notice something in the top? Do the colors of the top stay the same dude you got do when you If you look at this, do you see, um, something that you could figure out to help you understand what color to buy? No. Good, because there's none in there. So I just wanted to show you what happens in the real world. Let's go with Gray. Happens to be here. Gray was commodities worst performing asset class. So let's say you light gray and you owned it by the second year of it. Being the worst performing asset class, you're like I had gray sell. Great. Get me out of great sues. You sell great. What happens to grain goes up you're like, Oh my God, Seriously graze! Going up. I really did like Gray. I think I'll buy Grey again. What is? Great deal. Oh, then it goes up. You're like, OK, that's pretty good, you know, like great. Then what to do? Kick me out of grade. Great goes What is it? Goes back up, Get me out, goes back down and it just bounces all around, right? It's the worst. It's the best. It's the worst. It's the best. And now down here, By the way, it was the worst. It was the worst. It was the worst. It was the worst. Finally, is what goes back up. Do you think the people? So when they're down here typically And then what do you think, people? By all the time now, there's a lot of reasons why people do this. First of all, it could happen. You're 41 k plan. You open up your foreign K plan and you look that you get the statements and statement, shows you what the number one thing was. And so you're like why she just pulled my money in the number. One thing you make a change next year is the worst. You can drive yourself crazy in a 41 K plan. You shouldn't you drive yourself crazy an IRA account if you start doing this up and down, up and down. So this line here in the middle, which is black notice house. It's not going up and down as much. It's kind of gone right through the middle. That's a diversified portfolio that is a mixture of stocks and bonds over 20 years. Now here's what's interesting. That boring, diversified portfolio of stocks and bonds, a little bit of everything has had an annualized return in these 20 year periods of 7.56%. Pretty good, right? Boring is good. Here's what I say. Boring, boring, boring. Repeat after me. Boring, boring, boring. You want a boring investment plan and an exciting life. If you go to a cocktail party. What? Your investigation is interesting enough to talk about over a drink. Something's wrong with it. People don't go to cocktail parties and go, you know, it's amazing. I pay myself 1st 1 hour day of my income into a diversified portfolio. They should you will, but most people don't so you don't want to time the market. I'm gonna show this to you in other ways. There's a technical slide says average investors suck. The 30 year return for the average investor has been 3.98% according to Dalbar. At the same time, the S and P 500 has been over 10. Why? Because investors invest on, they buy high and they solo don't time the market. Don't trade diversified portfolio. Leave it alone. The reason time in the market so hard is that the markets move in small increments. Smalling From its meaning days, the markets go up in a small amount of time. They don't it doesn't go up on an annual basis. Consistent like this December wiped out investors again. The market went down over 20%. People panicked and pulled out of the stock market. They did. I meet them. Some financial bothers panicked. If you have fun antibodies that panics in a down market of the wrong financial visor, they should have a diversified portfolio. They should not be changing their investment philosophy. When the markets go down, have you have an investment? Bodies that says Don't time the market diversification works, and then the Susan Market corrects They tell you they have a new plan. You have an inexperienced financial visor who's doing something wrong? I've been saying the same thing for 26 years. Nothing changes because it doesn't need to change. This is showing you the rate of return the S and P 500 from 2019. 80. 2015 being in the S and P 500 with reinvested dividends. For that falling time had annual return of 12.5%. If you missed 70 best days of the of that period, he made 7.2%. If you missed the 5th 40 best days, you missed 3.7%. You miss the 50 best age you made 2.2%. Now I took that over 35 years. I can also reduce this down to 10 years. And what happens is the person misses the top 50 days. Lost money. You could literally get out the old It just happened. You could have got the market in December and you just missed a run up of 20%. And now what's happening is people reason one reason markets going up so fast, all of sudden people got out, including money managers, and they're having to chase it because now they're looking like an idiot. It's almost always he but But now they have to get down to change the market back in. So which is why the market could keep going higher. So it's time in the market that works, not timing the market. This is another chart that shows you what I showed before. It's in the back of the book on Lee. It shows it with dollars, So this shows $1000 invested in 26. Those that small company $1000 invested in 1926 is were $27,200,000 in 18 $26,000 invested. Large carry large companies worth $5,597,000. Right? If it's in bonds, which was the bottom part of the pyramid, it's worth $90,000. Do you notice a pretty significant difference now again, If it was diversified, you be right here. Still pretty darn good. But one thing that's kind of neat about that chart is showing you everything that went wrong in the world. There's always stuff going wrong. The markets go down, the markets go up. What the market to long term, they go up

Class Description


  • Create financial freedom starting with as little as $5 a day
  • Learn how to earn 10% rates of return of your money
  • Understand the automatic millionaire habit that changes everything
  • Retire early or transition early to a life you dream of
  • Understand the FIRE movement and how to apply it to your financial future
  • Know how to become rich faster, as a freelancer or a small business owner
  • Use the Automatic Millionaire pyramid system to double your money in 10 years or less
  • Know which companies, apps and investments today are making managing your money easier and cheaper


What if you didn’t need to be rich to live rich? What if there were a way you could achieve financial independence and live your dreams now?

In less than five hours – The Latte Factor Class can help you take control over your money and your life. Whether you’re just starting out in business, an employee, or you’re in debt and you just want to live the life you’ve always dreamed of, “The Latte Factor” is a one day program that has inspired millions.

David Bach is the Author of The Latte Factor and the creator of The Latte Factor Method. He’s also a nine-time New York Times bestselling author of books including Start Late, Finish Rich and The Automatic Millionaire. In How to Retire Early: The Latte Factor, David Bach will teach you why you are richer than you think. He’ll help you see a future that puts you in control over your finances and back in the driver's seat of your dreams.

It’s never too late to start living your dreams; today is your starting point. Whether you are living paycheck to paycheck, or simply want to increase your net worth, this class is for you if you’re ready for a fresh outlook on life and money.


  • Anyone who wants to stop living paycheck to paycheck
  • Freelancers
  • Small business owners
  • People who want to live their dream life


David Bach is one of America’s favorite financial experts and bestselling financial authors of our time. He has taught millions to live and finish rich through his seminars, live events, courses and books. He’s the author of 9 New York Times best sellers, with over 7 million books in print in over 19 languages - including Smart Women Finish Rich, Smart Couples Finish Rich, and The Automatic Millionaire. He’s a media favorite having made thousands of appearances the past twenty years, including on Oprah six times and the Today Show over 100 times. David is the co-founder of AE Wealth Management and Director of Investor Education. His latest book is The Latte Factor: Why You Don’t Need To Be Rich To Live Rich. David presents seminars for and delivers keynote addresses to the world’s leading financial service firms, Fortune 500 companies, universities, and national conferences.


  1. Class Introduction

    You don’t need to work five side hustles for the next decades to achieve early retirement. You don’t need to live paycheck to paycheck for the rest of your life. Meet David Bach and learn how small amounts of money can change your life. David shares his personal finance story starting from age 7.

  2. My Start in Investing and Teaching

    What did David’s first “financial advisor” teach him? Why is it so critical that women in particular begin their retirement planning now? David shares his investment history what you’ll learn in his book, The Latte Factor: Why You Don’t Need To Be Rich To Live Rich is about.

  3. Financial Education - Know Better To Do Better

    In this lesson, David paints a picture of the dire necessity of financial education for Americans. Learn about the mindset necessary for a happy retirement, how companies force employees out of work in their 50s, what rich people now that poor people don’t and how credit card companies prey on consumers. David lays out exactly what you will learn in this class.

  4. Start Early, Start Today

    Early retirees don’t all start with six or seven digit annual incomes -- most started saving and investing early. David shares a comparison of how early planning can immensely impact your retirement savings.

  5. The Latte Factor: How It Works

    What exactly is the latte factor and how can you find yours? In this class, David breaks down the latte factor math and shows you how to save money by cutting out small non essential living expenses and developing a daily mindset geared toward retirement. He also shares his pick of online resources and apps that aid in financial planning and investing.

  6. Student Success Story

    Hear directly from Elizabeth, a member of David’s inside team regarding her financial planning journey over the past 18 months.

  7. FITE - Financial Independence to Transition Early

    Learn about the FIRE movement and David’s take on transitioning vs retiring. David reviews how to plan backwards from your desired retirement age, introduces the 50/20 formula and shows the effect of turbocharging your income stream.

  8. Common Investment Mistakes

    Don’t make these common investment mistakes that won’t yield extra income. David gives advice on buying a car.

  9. Becoming Rich on an Ordinary Income

    You don’t need that much money to become rich or build up a nest egg. David shares research from Fidelity Investments that shows the concrete steps to take to become a millionaire through 401k investments.

  10. How Much do You Need to Retire

    How much should you save and invest or, as David says, pay yourself? See what you should be saving at 30, 35, 40, 45, etc.

  11. Retirement Plans & Where to start

    David orients you to the different types of retirement accounts available, highlighting their benefits depending on your needs. Learn the difference between a traditional vs. Roth IRA, spousal IRA, SEP IRA, 401k and solo 401k plan. What is recommended if you’re self-employed? What if you have employees? David answers your questions and points to brokerages, roboadvisors and apps where you can start.

  12. How to Earn 10%

    There’s a lot of talk about earning a 10% return on your investments -- how do you actually do it? David teaches you the rule of 72, a quick way to calculate how long it takes to double your money when calculations and retirement calculators aren’t at hand. David takes audience questions, addressing financial planning in relationships, investing while in debt, and his advice for self-employment.

  13. Investment Pyramid

    The opportunities for investment can seem overwhelming and intimidating; David presents an “investment pyramid”, displaying all investment options from low to high risk. Learn what makes a diversified portfolio and what David himself invests in. Lastly, David cautions against the high-risk investment zone and which investments to stay away from.

  14. Reasons Most Investments Fail

    In this lesson, David shares the top 4 reasons most investors fail; learn what not to do. See a historical representation of an investment from 1926 through today and learn why the stock market will always favor a “boring” investor.

  15. 5 Things to do During Market Correction

    Market corrections are normal and happen throughout history. David advises on what to do on your own or with your financial planner or advisor.

  16. Retirement Accounts and Investments

    What are target dated mutual funds, asset allocation funds, balanced funds and simplified ETF solutions? Why are they ideal investments? Which Vanguard fund does David recommend? David gives you homework in this class: crucial questions to ask yourself and actions regarding your 401k.

  17. Renting vs Home Ownership

    Why is real estate one of the best investments you can make in your future? David shares benefits and advice regarding mortgages, payment plans, bubble-proofing your real estate and how to become an automatic millionaire homeowner.

  18. Why Your Dreams Matter

    David closes, returning to the point of financial freedom: to live your dreams. He gives advice on different investments to consider depending on your time frame and how to plan a sabbatical. He ends the class with your final coursework: finding your latte factor and putting steps into place to start paying yourself first.


Ling Fan

Great class! Concise and powerful! Wish I knew this 10 years ago.

Kennie Johnson

Very helpful and inspiring

Carlos Figueiredo

I thoroughly enjoyed the course love it!