How to Invest for Beginners (2023)

so let's say you want to get startedwith this investing thing you might havea bit of money saved it's probably notenough for a house but you decide youshould probably invest it in somethingyou could invest in stocks sharesequities government bonds corporatebonds real estate foreign exchangecrypto nfts Futures Fine Art watchesthere seems to be tons of stuff outthere and you might have even seen thoseads on YouTube from the gurus talkingabout day trading and trading foreignexchange and how you could make money inthat way through investing and on top ofall of this confusion there's the veryreal fear that you might lose all ofthat money that you've worked so hard tosave up so in light of all of that thisis The Ultimate Guide to Investing ForBeginners and we're going to split thisvideo up into four parts which are goingto be time stamped down below so you canskip around if you feel like it part oneis going to be about the basics and thephilosophy behind investing part two isabout why and how to invest your moneyin stocks and shares in part three we'regoing to be addressing common fears andquestions and concerns about investinglike what if I lose all my money andthen in part four we're going to talkabout fast lane investing which is analternative approach to the traditionalinvesting thing to build wealth part onethe philosophy and the basics ofinvesting so let's start by talkingabout what is the point investing thepoint of investing is for your money tobe able to make more money so let's sayyou start off with a thousand dollarsthat you've saved up through yourhard-earned labor now you could put thatmoney under your mattress or you couldput it in a bank current account but theproblem with that is that there's thisthing called inflation that you might bereading about on the news and so yourthousand dollars might be able to buyyou a MacBook Air right now but a fewyears from now when inflation goes upthat MacBook Air is going to cost twelvehundred dollars and so over time yourmoney loses its purchasing power whichis why you want to ideally invest insomething because when you invest insomething your money grows magically onits own more on that later and thatmeans you can combat the effects ofinflation and that brings us to the nextquestion which is how does the moneymagically grow in the first place andgenerally the philosophy behindinvesting is that you buy something nowand that something makes you more moneyover time and there are two ways inwhich the thing that you buy can makeyou more money let's say you buy a houseit costs a certain amount of money tobuy a house right now but there's twoways the house makes you money numberone you can rent the house out and soyou're getting rental income every monthand secondly hopefully in theory thevalue of the house will also rise overtime if you hadn't bought the house andyou just had that money sitting in abank account and over time you're goingto be losing money because inflation isgoing to eat away at your savings nowhouses are an interesting examplebecause you get rental income and it'svery easy for us to imagine what thatlooks like everyone pays rent and soyou're making money but with most otherasset classes you don't have thisequivalent of rental instead a lot ofthese things you're buying and thenyou're hoping that you can sell them fora higher price over time the mainexception to this is some stocks andshares which we're going to talk about alittle bit later in the video and theseasset classes is a long list of thingsthat you probably have heard of but youmight not be entirely familiar with youknow we've got stocks shares andequities which are kind of the samething we've got hedge funds we've gotindex funds we've got bonds governmentbonds corporate bonds you might haveheard some people investing in watchesand then fine arts you've probably heardof people investing in crypto and evengaining Lots or losing lots in my caseor losing quite a bit of money becausecrypto has crashed recently and a lot ofthis can get very complicated quitequickly and so we're going to simplifythings and for the rest of this videowe're going to talk about investing instocks and shares because that is themain kind of investing that normalpeople like you and me can unlock fairlyeasily you don't need to have largeamounts of money which you need toinvest in a house you don't need to takeon huge amounts of risk and gambling andstuff like you need to do with cryptoand you don't need to be an accreditedinvestor or anything like you need toinvest in like ancient investingcompanies or all this fun stuff sostocks and shares are kind of the basicsof investing and usually when peopletalk about investing their money whatthey're referring to is I want to buysome Tesla or I want to buy some Netflixor I want to buy some Amazon and sowe're going to talk about that part twowhy and how to invest in stocks andshares so when you're investing instocks and shares for example you'rebasically buying a percentage ownershipin the company that you're investing inso let's say I wanted to buy shares inApple for example apple is a publiclytraded company which means the publiccan trade Apple stock now in a dreamworld I would just be able to go toapple.com forward slash buy and I'd beable to buy a stock of Apple and now Iown some percentage of the company inreality I can't do that directly I haveto go through a middleman which we calla broker but once I've gone through thismiddleman platform I now personally owna piece of Apple now I can make moneyfrom stocks and shares in two differentways firstly I could make money becauseI'm hoping the price of Apple orwhatever stock I've invested in is gonnarise over time so 10 years later I couldsell it for a lot more money than Ibought it fingers crossed but the secondway in which you can make money throughstocks and shares is similar to how youmake a rental income on a house becausecertain companies will pay what theycall dividends so for example in the UKthere's a company called BT BritishTelecom and they pay dividends so whenyou own a piece of BT you're not justhoping that the price will rise overtime they're also literally paying outsome of the profits that the companymakes to their shareholders and so iffor example you were ridiculously richand you owned 20 of BT then every timethey declare a dividend which might beevery three months you would get 20 ofthe profits that they are Distributingto shareholders in reality you and mewe're probably not going to own 20 of ahuge company like that because you putthat would cost absolutely billions butinstead we might get you know tendollars fifteen dollars twenty dollarslike five dollars 5.47 here and thereand if we invest in lots of companiesthat are paying out dividends then itfeels like you've got this free kind ofrental income but really it's profitsfrom these companies coming into youraccount every month and that's prettycool so at this point okay cool you cannow buy stocks in these differentcompanies you can own a small percentageoffset company but how are you supposedto choose which companies should you putall your your money in apple or Netflixor on Disney Plus or should you go witha shell or British Petroleum or RalphLauren or like I don't know Unilever oryou know these brands that you might befamiliar with now at this point peoplehave varying different opinions on thematter but I'm gonna cite WarrenBuffett's opinion on this which is alsomy opinion on this which is that ifyou're a beginner to investing unlessyou are legitimately a financialprofessional who literally does thisfull-time for a living you should nottry and pick stocks the average personwill not know enough to know whichstocks to buy they won't know enough toknow when to buy them but they don'thave to because if they can buy all ofAmerica through an index fund becauserealistically you and me we're notreally going to have an insight into ohI reckon Apple's going to do really wellbecause whatever or I reckon Disney'sgoing to do really well because whateverthere are literally Financialprofessionals whose full-time day job itis to do that kind of analysis and eventhen they don't get it right A lot ofthe time and so what you can instead dois instead of worrying about stockpicking what you should do probably notFinancial advice LOL is invest in anindex fund and that begs the questionwhat the hell is an index one well anindex fund is a fund and a fund is abasket like a group of stocks and sharesor other things but stocks and sharesfor example and the index componentmeans that this fund tracks a particularstock market index for example in the USthere is a really famous Index Fundcalled the SNP 500 and this is basicallythe top 500 biggest companies in the USand you can see here these are thecomponents of the S P 500 right now soApple makes up 6.4 percent of the S P500 because it's big company then we'vegot Microsoft Amazon alphabet which isGoogle Berkshire Hathaway which isWarren Buffett's company alphabet ClassC which is also Google Nvidia TeslaExxon Mobile you might be familiar withquite a lot of these companies but if wescroll all the way down to the 500thcompany we've got I don't know RalphLauren and Hasbro and didn't realizeHasbro was in the S P 500 but you cansee that Hasbro makes up 0.21 of the S P500 compared to Apple's 6.4 becausethose companies are hugely different inI guess market cap or valuation right sothe point of the S P 500 is that itgives you a single number that you cangraph over time of like how value ablethe U.S stock market is because to behonest most of the value of the U.Sstock market is in these 500 companiesand so if the value of these 500companies are slowly increasing overtime which It generally does that meansthe U.S stock market is doing well andthese companies are doing well and lifeis all good if for example you're in arecession where the stock market isgoing down or if for example covert hasjust become a thing and the stock markethas gone down that means thatcollectively people have decided thatthe value of these stocks is lower thanit once was and so the graph will godown in those moments so what does thisall mean for you and me as normal retailinvestors well basically what it meansis we can invest in an index fund solet's say I put a thousand dollars intothe S P 500 Index Fund that's very goodbecause it means that my thousanddollars is now split between 500 ofthese companies and crucially it's splitbased on the waiting in the S P 500 soof my 1 000 that I've just put into theS P 500 6.4 would be in Apple stock andso now I own 64 worth of Apple stock andthat's pretty cool I now own a bit ofApple 5.4 of that would be Microsoft soI now own 54 worth of Microsoft stockand 0.015 of that is going to be RalphLauren which is for 498th on the S P 500and so I now own 14 worth of RalphLauren stock now this is a very goodthing and this is what Warren Buffettrecommends my view for most people thebest thing to do is still on the S P500. he says that hey if you had anextra hundred thousand dollars to investyou should just put it straight into theS P 500 or some other big Index Fundbecause over time your money is going totrack the market you're not trying tosay hey I have a crucial insight intothe market and I know that apple isgoing to outperform all these othercompanies instead you're thinking youknow what I'm just a normal person Idon't have time to spend 80 000 hours aweek trying to research the [ __ ] out ofall this stuff I'm just gonna kind ofdiversify my money across all these top500 big companies in the US I thinkoverall U.S companies are going to go upover time and therefore I don't have tothink too hard about this so what's thealternative well we talked about how youcould theoretically pick stocks yourselfso you could say you know what I'm goingto ignore the S P 500 but chances areyou are not going to beat the marketchances are unless you just get reallylucky you're not going to be realreliably able to get the returns thatyou would get by just investing in all500 of these companies now there havebeen a bunch of studies and surveys andWarren Buffett even did a challengeexperiment thing about this thatbasically show that very few fundsoverall actually outperformed the S P500 and if you've got a fund that beatsthe S P 500 I.E it does better in thatyear than the S P 500 did it's unlikelyto do the same the following year and soa lot of these phones are trying toquote beat the market but as WarrenBuffett and a lot of these other peoplesay you cannot beat the market so let'sjust invest in the market directly justput your money in an index fund anddon't think too hard about it everysingle person I know who has invested bypicking stocks has lost money and everysingle person I know who has invested byjust investing in an index fund has mademoney over time the next question thatthis raises is okay cool I want toinvest in a stock market index fund howthe hell do I do that do I just go on sp 500.com forward slash buy and buy someindex funds again it's not quite how itworks you need a bit of a middleman andthat's where these kind of onlineplatforms come in now this is going tovary depending on whatever countryyou're in so if you want to find astocks and shares investment platform inyour country then just Google that inthe UK for example there are loads theones that I personally use are CharlesStanley direct because that's the firstone I started using in 2015. I also useVanguard Vanguard is super big and superlegit you can check it out and the appthat I use personally for investing inindividual stocks these days is trading212 and in fact incidentally this videois now sponsored by trading212 this iskind of fun as you can tell I'mrecording on a different day anyway ifyou want to get started with investingtraining212 genuinely is the app that Iuse it's the best way to get started youcan trade stocks and shares you can alsoopen an Isa an individual savingsaccount if you're in the UK one of thecool things about trading 212 is you canpractice investing with practice moneyso everything about the markets isidentical it's just that you'reinvesting fake money rather than realmoney and if you're uncomfortableinvesting real money for now this is agreat way to become more familiar withthe concept of investing and then onceyou're ready to invest with real moneyyou can just switch using a simplebutton on the app and you can depositmoney through Apple pay up to twothousand pounds and then you can usebank transfer subsequently and the othercool thing about trading 212 is they'vegot this really cool pies feature wherebasically you can look on the app andyou can see other investment pies thatother people have created so you'll havethese like Finance Pros that arecreating their custom pies and you'llsee that they've allocated 10 to the s por 20 to the ftse 100 or this percenterapple or Tesla or Microsoft or whateverand then you can see the performance ofthat specific pie over time and thenwhat you can do if you really want to isyou can copy and paste someone's piethat they have built into your owninvesting account and now you canautomatically with a single click investlet's say 100 pounds into that pie andso that 100 pounds will then be splitamongst the various allocations that theperson has decided to do in the pie andthat's great like obviously I'd stillrecommend investing in some broad stockmarket index fund like the S P 500 eventhough I don't give Financial adviceanyway if you fancy giving a go it'scommission free it's completely free tosign up you don't have to pay anythingyou can go to trading212 it's availableon the App Store on iOS and on Androidand if you use the coupon code Ali Aliwhen you sign up that will give you afree share up to the value of 100 poundsso you can get completely free money byjust signing up for trading 212. checkit out with a link in the videodescription or search trading212 on anyof the app stores but thank you so muchtrading 212 for sponsoring this videopart three common fears concerns andquestions about investing so if you'rebroadly very unlikely to lose moneybecause Vanguard collapsed overnight butyou might lose money if the value ofyour Investments goes down and this iswhere people get really really worriedbecause they always think ah you know ifI invested my pardoned cash into thesestocks and shares what if it goes tozero what if I lose my money now this isa common fear and certainly let's sayyou invested a thousand dollars into theS P 500 just before the financial crashin 2008 and then the markets crashed byI don't know 60 or whatever it was andso now your thousand dollars is worthlike 400 I know you're thinking oh myGod like I can't believe I've lost 60 ofmy money now if at that point you sellnow you have realized the loss nowyou've literally lost money because youbought the thing for a thousand and yousold it for 400. but if you just held onthen the market recovered over time andby 2012 it was at the same levels andthen it was just going up and up and upso even if you had invested lots ofmoney just before the 2008 financialcrisis if you had just stuck to yourguns and left that money in there you'dbe have you'd have doubled or tripled orsomething your money by now becauseoverall the stock market broadly goes upover a long enough time Horizon it's thesame with house prices you can buy ahouse and if you try and sell it nextweek then maybe the price will have gonedown but if you try and sell it 20 yearsfrom now chances are unless your countryhas been destroyed the price will havegone up and the longer you can leaveyour money in these index funds orwhatever the more it compounds over timeand as Einstein is famously put reportedto have said compound interest is theeighth wonder of the world what are thechances that all 500 of the biggestcompanies in the US suddenly are goingto drop to zero value overnightbasically zero percent I think if all500 of the biggest companies in the USall have their value dropped to zero I'mwe're going to have bigger problems inthe world than the value of my stockmarket portfolio and the reason why Ithink it's reasonable to make the betthat over time the stock market goes upis because every day thousands of peopleare going to work in each of thesecompanies every single day value isbeing created by the employees at Applethey're researching new technologythey're building new stuff they'readding an extra camera or an extra lensto the iPhone and all of that means thatbecause these people are putting in theinput of human labor you would expectthe value of the company to rise withtime because they're making more andmore cool stuff and because people aregoing to want to continue to buy thatmore and more of that cool stuff nowanother question people sometimes haveis how much money do I need to getstarted do I need to be like super richto start investing and the answer is noagain it depends on which platformyou're using but for example I'm trading212 or Vanguard and Vanguard I think youjust need 100 pounds to invest trading212 I think you can start with like 5again this is just massively variesdepending on your country so do someresearch and figure out what are themost reputable and legit Platforms inyour country and then you can investbased on that now there's two othercategories of stuff that I invest in Iinvest in real estate so I've got a fewproperties in the portfolio we're notgoing to talk about that because I'vedone a video about that over therebuying versus renting and that's usuallyoutside the range for most people untilyou've already made a lot of money to beable to afford a deposit on a house andget a mortgage and I also invest someamount of money in crypto yep and as wecan see here the total value of mycrypto portfolio is 200 000 but I haveactually lost 65 000 so I've put in 265kinto crypto and currently it's worth200k what can you do I'm hoping theprice Rises with time so generally whenit comes to recommending investing incrypto people often ask about this Iwould say if you want to take the gamblefine but make sure the only money you'reputting into your crypto account ismoney that you can 100 afford to losedon't try and think of investing ingeneral or crypto in particular as a getrich quick scheme but generally if youwant to invest your money in stocks andshares as Warren Buffett says and as Ido and as I generally recommend eventhough I'm not a financial advisor notFinancial advice Etc it's prettyreasonable to put that money in a stockmarket index fund like the S P 500 forexample by the way if you're enjoyingthis video so far I'd love to hear inthe comments what's been your biggestconcern about getting started withinvesting what is the thing that'sholding you back part 4 fast laneinvesting the alternative approach toBuilding Wealth so so far we've talkedabout what some people would somewhatdisparagingly called the call the slowlane approach to Building Wealth it'slike the slow lane and this and there'sthe fast lane now this is terminologyfrom MJ DeMarco's book of themillionaire fast language it's actuallya really good book but the basic idea ofslow lane investing is that hey I've gotsome money I'm gonna do my day job I'mGonna Save up 10 of my paycheck andevery month I'm gonna put 10 into mysavings account and then I'm going toinvest that money in the S P 500 andthen 50 years from now by the time I'm65 that money will have compounded andthen I'll Be A Millionaire this is avery very slow form of investing it's avery slow way to build wealth andcertainly it's fine to invest in stockmarket index funds I do that as well butthere is another approach to investingand it's worth talking about that herebecause when we hear investing a lot ofus just default to thinking oh I guess Ishould buy stocks and shares or I guessI need to buy a house but if we reallythink about it what is the point ofinvesting money the point of investingmoney is for your existing money to makemore money further down the line that'sall the point is the point is not toinvest in stocks and shares stocks andshares are a vehicle by which you canturn your money into more money furtherdown the line but when it comes to FastLane investing fast lane investing isbasically that instead of investing insomeone else's business I.E apple orAmazon or Google or whatever you'reinvesting instead in yourself and inyour own business the S P 500 goes up byseven percent each year again on averageso if I put a thousand dollars into theS P 500 it would be worth on average onethousand and seventy dollars twelvemonths from now and so the questionbecomes can I do something better withthat thousand dollars to make more thanseventy dollars in the next 12 monthsand generally the answer is hell yesthere are kind of two things I couldinvest in I could invest in my ownability to make money so for examplelet's say I'm a healthcare assistant ina hospital and I can take a course for ahundred pounds and that course gives methe ability to become a phlebotomistsomeone who takes blood and let's sayI'm making 15 pounds an hour as ahealthcare assistant but I could bemaking 25 pounds an hour as aphlebotomist now all of a sudden I'vepaid 100 pounds I've invested 100 poundsinto my own skills but I've been able toincrease my earning capacity by nearly2X and therefore within four hours ofworking as a phlebotomist I will havepaid off my hundred pound investment andnow if I work as a phlebotomist insteadof a healthcare assistant I'm nowearning more than 10 pounds an hour andso every 10 hours of the work that I doI'll be earning that hundred pounds backand so my return on this hundred poundsis way way way higher than just sevenpercent because I fundamentallyincreased my own value to the marketI've fundamentally increased my ownability to make money this is whyinvesting in your own education isgenerally a very reasonable thing to doyes you can find out lots of stuff onYouTube and I'm always in favor of likehey if you're broke don't buy fancycourses don't take out loans to buycourses find free information on theinternet but I've got so many friendswho have an extra few thousand poundsand they put it in the S P 500 becausethey're hoping it'll grow over the next50 years rather than just spending somemoney on a weekend course on whateverskill they want to improve and then theycan use that skill to literally make wayway more money than they would by juststicking in the S P 500 so that's kindof one way of Fast Lane investing youinvest in your own ability to make moneybut the other way of Fast Lane investingis by investing in your own businessobviously this only applies if you havea business want to start a business butgenerally the way to get rich quicklyquickly as in the next 10 years ratherthan the next 70 years is to build yourown business to own your own businessand to increase the value of thatbusiness rather than giving your moneyto Apple or to Tesla so for example if Iwanted to I could start my own coffeeshop or my own online business or my ownYouTube channel which is a business if Iwanted to I could start my own webdesign agency or social media marketingagency if I wanted to I could learn howto code and I could build software and Icould turn it into an app I back myselfto be able to make a business and teachmyself the basics of how to run thatbusiness and make that business morevaluable in terms of return percentagethen the seven percent I would get inthe S P 500 and when I interviewed Alexfor Mosey who's like a 200 milliondollar entrepreneur he call he kind ofcalls it in investing in the s p versusinvesting in the sne it's a whole S P500 versus SME 500 but like you will geta significantly higher return investingin your own ability to make make moneythen you will in any any market and hisadvice as well is that you should investin the sne you should invest in yourselfinvest in your own skills invest in yourown ability to make money invest in yourown business because the Returns on thatare way more likely to be ridiculouslyhigher than just that crappy sevenpercent that you get by investing in theS P 500 so if for example you areinterested in investing in your owneducation and you want to start aYouTube channel and really take itseriously and treat it like a businessyou might like to check out my owncourse part-time YouTuber Academy it'sgreat people love it it's good vibesthat'll be linked down below and thatcourse is basically about teaching youthe things you need to know to systemizeand scale a YouTube channel if you wantto treat it like a business it's not acourse for people who want to do it as ahobby but if like me you want to turnyour channel into a business and makemoney that way that's a course thatmight help you but of course everythingis available on YouTube for free as wellso if you're broke or if you have loadsof time and not much money then ofcourse you can find all this informationfor free on the internet anyway I hopeyou found this video useful if you'reinterested in learning more about thisfast lane investing approach to BuildingWealth you should check out this videohere which is my book review of themillionaire fast lane by MJ DeMarcowhich is the best book I've ever read onhow to make money in a quick fashionquick meaning in the next 10 yearsrather than the next 60 years so checkout that video over there thank you somuch for watching and I'll see youhopefully in the next video