• To make money sustainably, you need to be useful.
  • That can mean doing useful labor or investing capital in something useful.
  • Reddit stock fads aren't useful.
  • This is an opinion column. The opinions expressed are those of the author.
  • Visit Business Insider's homepage for more stories.

How is wealth made? On a very basic level, it's made by doing useful things. Useful labor earns a wage. Useful allocations of capital produce profits. The most reliable path to wealth creation is value creation.

This isn't a perfect rule. Some people work at useless jobs, and some people make lucky investing guesses that produce gains. You can even make money sometimes by playing literal roulette. But roulette isn't a job, unless you're a croupier, and neither is treating the stock market like a game of roulette. In the long run, activities that don't create value shouldn't create wealth — the gains they produce are unsustainable, and unsustainable things eventually stop.

Now, if you understand that day-trading stocks on your Robinhood app is basically a casino activity — if you're taking risks you can afford, and you have a financial plan the relies on your day job and some boring investments — then fine, have fun, enjoy your hobby trading shares of GameStop and cryptocurrencies. But a lot of people seem to be convinced this hobby is a job — maybe because the rising price of Bitcoin has allowed some people who do this hobby to luck into job-like incomes.

That shouldn't persist. Even if cryptocurrencies have useful applications, that doesn't mean they should persistently rise in value. Stocks go up in the long run because the economy grows and corporate profits grow; a larger economy does not increase the fundamental value of a crypto asset. When you make money trading crypto, that's luck, not useful capital allocation and definitely not work.

And let's be honest, this is also what's happening with Reddit-driven stock fads. Retail investors aren't identifying market inefficiencies and allocating value toward systematically undervalued firms. They are guessing.

Incidentally, a lot of institutional investors are guessing, too. That's why the retail investing market has been shifting over time from managed funds to index funds, which have low fees because you're not paying anyone to guess.

The lesson to draw from that shift isn't that you might as well guess yourself. It's that guessing isn't useful. Don't quit your day job.

Disclosure: My financial investments mostly consist of broad-market stock and bond index funds. I also have exposure to residential real estate through stock holdings in six REITs: AVB, CPT, EQR, ESS, MAA, and UDR. I don't do short-term trading.