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I was chatting with a friend recently who is relatively new to investing.

They told me:

• They have a financial advisor

• Most of their savings are in cash

• They vaguely understand tax-free accounts

• They don’t want to think about their investments

• They have ambitious financial goals

Does this sound at all like you?

This made me realize that much of Wealth Potion’s content — both on this newsletter, and on YouTube — assumes a certain level of financial knowledge.

So today, I’m breaking down the 5 Levels of Investing, as if building wealth were a video game:

0. Debt (Leaving Tutorial Island)

1. Saving Cash (and the Hidden Boss of Inflation)

2. Financial Advisors (Avoiding Pay-to-Win Games)

3. Tax-Free Accounts (Free Money Cheat Code)

4. Passive Investing (Auto-Battle Mode)

5. Active Investing (Hardcore Mode)

And just like a video game, progressing through these levels will help you defeat the final boss: achieving financial freedom.

This is a longer read, but possibly the most actionable article I’ve written. So buckle up, and if you prefer, check out the YouTube version:

Let’s dive in.

Level 0: Debt (Leaving Tutorial Island)

Just like the tutorial in a video game, some players skip this level altogether.

This could be because you didn’t take out student loans, you have support from family, or, you were extremely financially disciplined and you paid their way through school.

But I’m guessing most of you reading this have some sort of debt, such as student debt. For example, I started my career with ~$40,000 in student loan debt.

We’re not alone. 77% of American households have debt, with student loans being the fastest-growing category of debt (Source).

The Bad News: Student loans usually can’t be erased by filing bankruptcy.

The Good News: Student loans typically carry a lower interest rate than other debts.

How to Beat Level 0

1. Identify all debts: student loans, credit cards, lines of credit.

2. Pay them off aggressively or at least create a solid repayment plan.

3. Enjoy the psychological boost of being debt-free

(That said, sometimes paying off low-interest debt isn’t the best move—we’ll cover that in a future article.)

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Level 1: Saving Cash (The Hidden Boss of Inflation)

Investing beginners often start by saving in cash.

And obviously, saving in any form is a win, when the alternative is spending that paycheque instead.

Can you guess what the problem with saving in cash is?

It’s a topic we talk about a lot on Wealth Potion…

It’s inflation.

Inflation means that your cash loses value every year.

Maybe you know a boomer who bought a house for $20,000 in 1975. Now that house is worth $1,000,000.

Now imagine if they didn’t buy that house, and stuck that cash in a shoebox in the attic.

50 years later, you open up the shoebox… and it’s still $20,000.

This is what we mean when we say cash “loses its value”.

$20,000 of cash in 2025 has less purchasing power than $20,000 of cash in 1975.

How to Beat Level 1

1. Save 3-12 months of living expenses in cash (your emergency fund).

2. Invest everything else in assets:

   • Stocks

   • ETFs

   • Real Estate

   • Bitcoin

   • Bonds

The specific assets will depend on your goals and your risk tolerance. And we’ll cover these in more detail shortly. But the key is this:

Assets increase in value over time. Unlike cash, which does the opposite.

Level 2: Financial Advisors (Avoiding Pay-to-Win Games)

At this point, many of you will enter the existing financial system:

• You go to your local bank

• You open up a chequing and savings account

• You sign up for a credit card

And then the banker tells you that you get a financial advisor.

Most people don’t want to worry about their investments. And this is how financial advisors get pitched to you.

Financial advisors certainly provide peace of mind, but at a cost. Their fees — often "just 1%" — compound over time, eating into your long-term returns.

And as we’ve discussed in the past, compounding is so extremely powerful that you will lose way more than 1% of your wealth in the end.

Let’s look at 2 examples:

Adam invests $1,000 every month into the S&P500 (10% return) for 40 years. But he has a financial advisor who takes 1% every year.

Beth also invests $1,000 every month into the S&P500 (10% return) for 40 years. But she manages her investments herself, buying index ETFs through her brokerage’s mobile app.

Adam retires with $4 million, and Beth retires with $5.3 million.

That 1% fee, compounded over 40 years, results in a $1.3 million dollar difference.

Avoiding a 1% fee means that Beth has 31% more wealth at retirement.

Wealth Potion will be sharing many more articles and videos about compound interest, because it truly is a mind-bending phenomenon. So stay tuned.

How to Beat Level 2

We avoid the fees of financial advisors by buying index ETFs.

1. Say no to financial advisors pushing managed funds.

2. Open a self-directed account or robo-advisor account.

3. Invest in low-cost index ETFs (more on this soon).

A little financial knowledge saves millions—which is why you subscribed to Wealth Potion. 😉

Level 3: Tax-Free Accounts (Free Money Cheat Code)

Perhaps the single most important thing you can do to maximize your wealth is to leverage tax-free accounts.

Why? Because it reduces the amount of tax you pay to the government.

We just saw how a 1% financial advisor fee can compound over your lifetime. Now imagine a 15% tax…

In Canada, your tax-free accounts are:

• Tax-Free Savings Account (TFSA)

• Registered Retirement Savings Account (RRSP)

• First Home Savings Account (FHSA)

In the United States, your main ones are:

• Roth IRA

• Roth 401(k)

• Traditional IRA and 401(k)

The details of these specific accounts are beyond the scope of this article. But it’s important to understand how they function at a general level.

Think of a normal brokerage account as a garden.

In a normal brokerage account (also called a margin account), any money you make on your investments will get taxed (capital gains tax)

You can plant seeds in this garden (buy and hold investments)… but there are some animals and insects (the government) that eat some of your wonderful fruits and vegetables.

Your tax-free accounts are like a greenhouse.

You can plant the exact same seeds in the greenhouse (you can buy the same stocks, bonds and ETFs), but since they are in the greenhouse, they won’t get eaten by pests.

And as a result, your harvest (your wealth) will be much more bountiful.

That’s why these tax-free accounts generally have limits on how much money you can deposit. Because they’re that valuable! Check your CRA/IRS account for contribution limits.

1. Open a tax-free brokerage account (e.g., Wealthsimple, Robinhood).

2. Contribute as much as possible to tax-free accounts before investing elsewhere.

How to Beat Level 3:

1. Log into your CRA / IRS account and find out what tax-free accounts you have access to, and how much contribution room you have.

2. Open up a tax-free brokerage account with your brokerage (e.g. Wealthsimple in Canada, Robinhood in USA)

3. Contribute as much of your excess cash as possible into these accounts until you’ve reached your contribution limit

This ensures more of your wealth grows tax-free instead of going to the government.

Level 4: Passive Investing (Playing the Game)

Now that your cash is in a tax-free account, what do you invest in?

Picking stocks is overwhelming, but luckily there’s an easy mode: Index ETFs.

Why Index ETFs?

• Instead of picking individual stocks, you buy a diversified basket.

• Example: VOO tracks the entire S&P 500—so you own 500 companies at once.

• The S&P 500 has averaged a 10% annual return for the past 100 years.

And not only are index ETF’s easier than picking stocks, but they’re also more effective than most active investing strategies.

The hardest part is setting up your brokerage account.

How to Beat Level 4

TL;DR – Buy index ETFs and chill.

• Open your brokerage app, search for an S&P 500 ETF (like VOO or SPY), and buy regularly.

• Keep investing — ignore short-term market swings.

• Let compounding work its magic over time.

If you made it here, congrats! You’re already ahead of 99% of people. 

And quite honestly, most people should stop here.

But some of you want to go beyond passive investing…

Level 5: Active Investing (Hardcore Mode)

Some of you will look at the 10% annual return of the SP 500 and think “I want more than that.”

Firstly, a warning:

The vast majority of active investors underperform the SP500.

There are many reasons for this, but perhaps the simplest explanation is that human beings are emotional.

When our investments plummet, we get scared and sell.

And when our investments skyrocket, we get euphoric and buy more.

Or, we simply buy investments because we like them emotionally, not necessarily because they are a smart investment.

There are an infinite number of ways you could actively invest your money.

With all that said, if you believe that you have what it takes to not panic when your investment portfolio drops…

A Speed Boost For Your Investment Portfolio

There is one investment that has outperformed the SP500 consistently since it’s existence. And despite this, this investment is still maligned or dismissed by most people.

If you’ve followed Wealth Potion for a while, you might know what I’m going to say…

That’s right. Bitcoin.

I know some of you will have an allergic reaction to hearing the word Bitcoin. If you’re open to hearing a different point of view, you can check out this article on the differences between Bitcoin and “crypto”.

Crypto, rightfully so, has a terrible reputation. Crypto is full of scams.

But in my humble opinion, if you lump Bitcoin into “crypto”, then you are missing out on a generational monetary technology.

As I mentioned in this week’s video, I will be doing deep-dives on each of these 5 (technically 6) levels to help you progress through them.

I’d love to hear from you:

• Which level are you at today?

• Which level would you like to reach in 2025?

• Which level(s) make more sense to you now with these analogies?

And as always, thanks for reading.

To your prosperity,

Brandon @ Wealth Potion

Build in Public Update

This week’s article and video was a labor of love.

I knew it would take me a lot longer than my usual videos, because of the scope of the topics I wanted to cover. I’m essentially condensing the entire investing journey into a single, 20-minute video.

But that’s also what made it fun. I worked multiple late nights this week for the first time since my surgery, and it felt like the time was flying by. I think this was for a few reasons:

• Because this topic was inspired by a real conversation with a friend, it felt like recording this video would be helping him directly (and anyone else like him)

• The additional challenge of tackling so much content in one video made it fun. Just like a challenging video game (Dark Souls, anyone?)

• The difficulty of the video also presents opportunity - I can see this video turning into a full series on each of the 5 levels, or even a lead magnet resource and/or a paid course offering in the future

What did you think of this week’s video and article? I know it was longer than usual, so if you’re reading this, you’re a true friend 🧡 and that means your feedback is even more important to me.

Thanks everyone. See you next week.