Introduction to Investing for Beginners

so you’ve saved up some money and you want it to work for you you’ve probably heard of this term called investing and that’s the practice of allocating your money in a way so that it returns more to you in the long run however if you are a beginner it can be really overwhelming there’s tons of terms you’ve probably never even heard of for example bear versus bull markets ETFs index funds limit orders ticker symbols the S P 500 the list goes on.

so I’m actually of the firm belief that investing doesn’t actually have to be overwhelming so in this video we’re going to show you why you should be investing how you’re going to be investing and what to actually invest in and these are going to be in terms that anybody can understand we’ll also go over some basic beginner strategy and also talk through some frequently asked questions as well as go through a live example of actually how to invest so if that sounds good to you stay a while listen grab a drink and let’s get into why you should be investing

Why Should You Invest?

all right plain and simple the reason why we want to invest is that we want our money to work for us so if you’re actually saving your money right now in a savings account for example at a big Bank like Chase or Wells Fargo or anything like that the interest rates that they’re paying you on your money is not very high typically a bank like that might offer you point zero one percent or even 0.15 on your money so let’s pretend for a second that someone hypothetically gives you one million dollars and you take that million dollars and you put it in Chase Bank in a savings account that yields you about point zero one percent at the end of the year that million dollars

will have earned you one hundred dollars in that case your million dollars is not working very hard for you imagine you were getting 10 on the money per year that would be a hundred thousand dollars that’s a huge order of magnitude different from your hundred dollars which is the typical savings rate at a big Bank even five percent on a million dollars would be fifty thousand dollars a year and I think that many people could live comfortably in retirement off of that money so investing can get our money to compound over time and the term compound interest refers to the interest that you earn on your own interest so this

is kind of a confusing concept if you’re new but it can be illustrated by this example here say you invest a thousand dollars and you get a 10 return at the end of year one you’re gonna have eleven hundred dollars now when you start that next year if you get ten percent on eleven hundred dollars you’ll end up with year two at the end of year two twelve hundred and ten dollars now pretend that this pattern continues for another 20 years your money

starts to earn money on the previous balance every single year so at the end of year 20 you’re gonna have six thousand and 727 so just by putting a thousand dollars in and getting a return every single year your money starts to grow and grow and grow and that’s called compounding

The Impact of Inflation – Introduction to Investing for Beginners

another reason we want to invest some of our excess cash instead of having it sit in a savings account is the concept of inflation the US has a central bank and that’s called the Federal Reserve and that actually dictates the monetary policy for the United States but you just need to know that they are targeting a two percent inflation rate every single year for a healthy economy but I’m sure you’ve seen the news recently recently the inflation reports are saying it’s between six to eight percent a year that means if our money isn’t earning six to eight percent a year that money

is losing value just by sitting in the account it’s losing purchasing power all right if you really want to see inflation in action all you have to do is look at the stamps that you buy for your letters in 1971 the stamp cost eight cents to mail a letter as of this year in 63 cents to mail that same letter the mechanics are exactly the same the stamp allows your letter to be delivered anywhere in the United States But as time has passed the stamp has just gotten more expensive due to inflation so that’s also why we want to invest

How Do We Actually Invest?

Introduction to Investing for Beginners– so let’s get into how do we actually invest the first thing to understand about how to invest in the stock market is to understand that we can actually invest in a variety of things so you can invest in companies like investing in stocks so the better that a company does financially the better that your investment is going to do you could also invest in real estate so your family may have bought a house in the 90s and maybe they bought it for a hundred thousand dollars at that time but over time nowadays your family home is worth one million dollars that 900k difference that you’re seeing there.

is known as real estate appreciation and appreciation is a term to describe what what happens to your asset when it appreciates over time so it increases in value over time you could also invest in Collectibles so Pokemon cards for example the first edition Charizard cards are going for like twenty thousand dollars these days but back in the 90s the late 90s when the Pokemon cards

just came out those cards were probably worth no more than twenty dollars now all of these Investments do carry risk and it can be pretty difficult if you’re a beginner to figure out what to actually invest in but I promise you if you just keep watching we’re going to answer all of these questions for this video we’re going to be talking about investing in the stock market so investing in companies as this is the most common type of investment and also has the most predictable returns over a long period of time I’m going to define a long period of time as anything over 10 years but the longer that you hold on to your stocks and Investments the better and I’m going to show you with a stock market example

Introduction to Investing for Beginners- Understanding the S&P 500

so this is the graph that represents the S P 500 which is known as the top 500 companies in the United States and I’m going to explain a little bit later in this video how to buy this exact Market or this exact s p 500 with just one purchase but what I want to show you guys is what’s really interesting here is that if we click on Max we can see that this S P 500 was started back in 1983 and you can see that the general Trend in the general direction is that it goes upward over time now sure there are some dips and there’s some valleys right here as you can see famously in 2008 the market kind of had this little crash right here and and same in the 2000s it

also the.com bubble it also crashed right here as well so sometimes there are periods where if you if you don’t hold long enough you could lose money so for example if you bought in 2000 you sold in 2003 right here you would have lost money investing in the S P 500 but if you had held long enough you can see that back over here in 2015 you would have made money on because it’s higher this this number right here is higher than what it was back in 2003. historically if you invest in the S P 500 Index it typically returns between 8 to 10 percent a year and that’s since the Inception of the s p 500 so that means if you had put a hundred dollars of your hard-earned

money back in 1980 let’s say you were live back then and you invested it into the stock market it would be worth nine thousand nine hundred and seventy seven dollars today adjusted for inflation a hundred dollars is worth 360 dollars today but that means that your money still would have gone up about 27 times in value just for investing and that’s why it’s so important to invest and grow your money so that you’re not just leaving money on the table and honestly investing is not that difficult especially if we know what to invest in – Introduction to Investing for Beginners

How Much Should You Start With?

so your money in that case when you only have a hundred dollars it’s much better to invest that in yourself build some skills start a side hustle so that you can get more consistent income but if you are someone with a consistent salary a consistent income you don’t have any High interest rate debt and you have an emergency fund taken care of that’s when I would say start to set

Introduction to Investing for Beginners- aside a portion of your income every single month or every single paycheck and invest that into the market if you’re still having trouble trying to figure out how to make money you should should check out my video on how to go from zero to a hundred thousand dollars within a year I just posted that on my channel not too long ago

Live Example: Buying Shares on a Brokerage App

Introduction to Investing for Beginners- okay so let’s go through a live example of buying shares on a brokerage app now obviously I change clothes because I did record this the other day but the recording got kind of messed up so I’m doing it again now but in terms of The Brokerage you choose it doesn’t really matter too much.

Introduction to Investing for Beginners- they’re more or less the same across the board as long as they are one of the bigger brokerages like Fidelity or Charles Schwab or TD Ameritrade Etc all these platforms will take care of calculating the taxes for you the commissions are going to be low or even zero for some of these and the only really big difference is the interface so it really just comes down to like personal preference I personally use Fidelity or Robinhood just because their interfaces are really easy to use and some of these brokerages if you’re not even signed up yet you can get some free stocks when you use for example my links Down Below in the

description so I’ll leave those down below in case you want to get some free stocks when you sign up for them but it’s definitely not required it’s just something that’s there okay so let’s actually go through and buy some shares of a ticker symbols such as voo that’s an ETF that tracks the s p 500.

all right so you usually come up to one of these screens and I’m just going to click on trade at the top left right here and then I’m just going to type in vo you can see that it’s actually listed in my symbol or company names for the recent quotes but I’ll just type in vo anyway and it’ll come up the Vanguard 500 Index Fund so we’re just going to click on that now we’re at this screen we can see that it’s trading right now for 367.16 I’m just going to click on Buy all right once you get to this screen this is where you want to just choose buy for the action as you can see here you can also press sell if you had some shares but we’re just going to buy today so we’re going to click buy the quantity type here you can choose to buy in shares or the dollar amount so I’m just gonna buy one share right here and just kind of show you how it works so it’ll tell you that the estimated cost here is 367.10

for Introduction to Investing for Beginners – the order types is Market or limit now these are a little bit complicated but all you really need to know as a beginner is that market will make make it so that you buy these shares as soon as possible so as soon as possible ASAP if you choose limit that’s when you actually have to set a limit price and that means the order will only go through if the price of that share is trading at the price that you specify so it’s a little bit more I would say customizable so that you get the perfect price that you want but for the sake of our example we’re just going to use market and I’m just going to click on preview order all right so this is the order preview it just kind of goes

over an overview of what you’re about to buy and then once you’re ready to buy here you’re just going to click the place or button and we’ll do that confirming trade and boom order received and I have a confirmation number it’s easy as that now let’s actually go through an example and buy with dollars since I just showed you how to buy one share let’s actually buy a hundred dollars worth of VO because you can also do that too all right so now we’re back at that trade screen that I showed you earlier we’re going to click on buy and then instead of shares we’re going to choose dollars and let’s say we only want to buy a hundred dollars worth of VO we can just type in a hundred dollars right here and same thing we’re going to place it as a market order

and if we just preview this we can see that the order preview in this case the estimated order value is only a hundred dollars so we’re basically buying a fractional share of VO which means we’re not going to get the full share we’re probably going to get like 100 divided by 366 what is that uh we’ll get 27 of one share so 0.27 shares of VO I’m just going to click on place order right here and boom just like that we’ve placed an order for some shares so that’s exactly how that works within the Fidelity app and many of The Brokerage other the other brokerage apps are going to be very similar

Conclusion

all right guys if you enjoyed this video I hope that it was incredibly valuable and helpful as a beginner getting into investing please share this with a friend if you think it would be helpful and make sure to check out the links Down Below in the description and also lastly subscribe to this channel because we come out with new investing personal finance and really cool videos all the time and I hope to see you guys in a future video alright peace