Skip to main content
Loading Explore guides…
Investing for Beginners · Acedra
Home
Explore
Business
Investing for Beginners
Sign in to save
Chat
If YouTube asks you to sign in, open the video on YouTube.
Watch on YouTube
Reload player
Transcript
59 segments
Copy
Hide video
0:00
As a former financial adviser, one of the biggest questions I get is, "Humphrey, I have some extra cash. How do I invest it and make it grow?" And for a beginner, it can get really overwhelming. There are a ton of investment choices out there and terms that probably sound like a foreign language. For example, what does ETF stand for and should you place an order as a market or a limit order. So, that's why I made this introductory video today on everything you need to know to start
0:24
investing this year. And by the end of this video, you will be equipped with the knowledge to start your first investment as well as how to continue investing for the rest of your life. I think that these 20 or so minutes will be some of the best uses of your time here on YouTube. So, make sure you watch this video and really pay attention and take some notes if you can. Now, there are seven sections in this video as well as a live demonstration. So, we will
0:46
talk about the why, how, and what do we invest in as well as some beginner strategies as well. So, let's get right into it. Why do we want to invest in general? There are two big reasons we want to invest our money. Number one is that if your money is sitting in a bank at the normal checking account rates, it will be losing value to inflation. The US Federal Reserve targets a 2 to 3% inflation rate per year to keep the economy healthy. And you can kind of feel that in your day-to-day life. As an
1:11
oversimplified example, a Chipotle burrito 6 years ago cost me $8.50 and these days it's closer to $12. So, if you had $50,000 in 2019, you could have bought 5,882 Chipotle burritos with that $50,000. However, these days, that same 50k can only buy you 4,166 burritos. And that's 1,700 fewer burritos for what? Inflation. Now, I have a lot of ideas on what I could do with 1,700 burritos. But my point here is that inflation has made it so that you can now afford less with the same
1:45
amount of money. So therefore, we need to make sure we're at least beating out inflation when it comes to our cash, and we can do so by investing it. The stock market as a whole returns about 8 to 10% per year historically over the past 80 years or so. So if we invest, we can reasonably expect that over time, we will grow our money at a rate at least faster than inflation. The second reason we want to invest is that you will often hear the phrase, "It takes money to make
2:08
money." And this is illustrated beautifully with the concept of compound interest. Pretend you have $1,000 generating you a 10% return per year in the market. That's a $100 per year you are receiving for investing, which is nice, but it's not life-changing. In year two, you would get 10% again, and now you'll have $1,210 because you're getting 10% on the now bigger sum of $1,100 at the end of year 1. Now, if you repeated this every year for 20 straight years, you would have $6,727.50
2:38
by the end of it. So just by putting $1,000 into your main account and getting a return of 10% every year, the money compounds on itself and grows bigger. Now imagine you had a million dollars earning you a 10% return in the market. That's $100,000 per year that you are earning just for investing it. All that's really changed is how much you've invested. And you can see that the more money you have, the more money you will make. More money equals more leverage. So when you have more money to
3:03
work with, the returns from having that money increases proportionally as the amount that you have increases. Okay. So now that we know why we want to invest, the next question is why do we want to focus on investing in stocks which are just shares of ownership in public companies? There are so many investments out there. You could invest in real estate, commodities like gold and silver, or you can even buy collectibles like art or Pokémon cards. But the reason we want to invest in companies
3:26
within this video specifically is that it's very accessible. It has predictable returns over time and it's very liquid. When an investment is liquid, it means you can convert that investment into cash without much trouble. If you buy a house for $500,000 in cash and you wanted to sell the house next week and get your $500,000 back, it's not going to be really easy. You would have to typically list the house again. You would have to find a buyer and then go through that whole real estate process,
3:52
which usually takes at least 30 days. Real estate in this case is not very liquid. However, buying a stock on the stock market is very liquid. You could buy a share of Coca-Cola stock in the morning and sell it in the afternoon and get your money out. In terms of predictable returns, earlier I said that the stock market as a whole typically returns 8 to 10% per year as an investment. So, this is the graph that represents the top 500 companies in the United States, also known as the S&P
4:18
500. I'll explain a little bit later how we invest into the top 500 companies with just one purchase. But for now, what I want you to see is that the trend of the S&P 500 is that it grows slowly over time. The S&P 500 is a good representation of the US stock market. And the performance of it tends to trend in the general direction of upwards over time. So that's a really good thing. I mean, you will get some dips and valleys here and there as well as periods of
4:42
flat trading, but over a long period of time, this should go up, which means that it would benefit you to be a long-term investor. So historically, if you invested your money into the S&P 500, it would grow at that rate of 8 to 10% per year. So for example, if you had a $100 of your hard-earned money in 1980, say you were alive back then, and you left it invested in the entire stock market, which you can do with an index fund, it would be worth over $17,000 today. Adjusted for inflation, $100 in
5:10
1980 is worth $393 today. That means your money has still gone up in value 44 times more than inflation just for investing. And that's pretty cool. Now that we figured out that we are going to invest in stocks, the next question is how do we actually do it? First, you will need what's called an investment account. This is like opening up a bank account, but you can do so online. And the account is for the sole purpose of holding and investing in stocks. Investment accounts come in many
5:37
different flavors, but two of the main ones are retirement accounts and just simple normal brokerage accounts. A retirement account is something like a 401k or an IRA in the United States. So, a 401k is employer sponsored and an IRA is an individual one. You might have heard these terms if you have an employer. It's usually an employer perk to offer you a 401k. If you're in the UK, Canada, or Australia, I will go ahead and put up the equivalent account types on the screen right now. The main
6:02
benefit of investing in a retirement account is usually that there are some tax advantages. So, if you are investing within a retirement account, just know that there will be a trade-off of the tax benefits and that's usually that you have to tie up your money until you retire. Some people like this type of forced savings and some people just really don't. It just depends on the person. If you don't want to invest solely in a retirement account, you can invest in what's called a regular
6:25
brokerage account, but then you will pay taxes whenever you make gains and actually sell the stocks for gains. Now, back in the day before the internet, you would call up a stock broker to help you invest your money. It's kind of like the scene in that famous movie, The Wolf of Wall Street, when he's selling stocks over the phone and he writes down the orders over the phone. You would need to have a broker typically to have you place trades because the entire
6:46
financial industry is very regulated. These days though, you can just sign up for an online brokerage account and they will act as your broker at a place like Fidelity, Charles Schwab, Robin Hood, etc. At those brokerages, you can place an order for your index fund, ETFs, or stocks that way. And if you aren't sure how to actually do that, don't worry. We will have a live demo at the end of this video where I'll show you exactly how to do just that. All right, so cool. We now
7:10
know why we want to invest, why we're going to be choosing stocks to invest, and the logistical method and how to buy stocks. But now we need to answer what should we invest in? One option is investing in individual stocks like buying shares of Apple, Microsoft, Nvidia, Google, Tesla, etc. This could be a fine strategy if you know what you are doing. In general though, investing in an individual company can take a lot of work and research, and often times it's much riskier and more volatile than
7:36
just investing in index funds and ETFs. A lot of financial adviserss will put their clients funds in index funds and ETFs because they're simple investments that are well diversified. And if we invest in them consistently over time, the path to becoming a millionaire as well as reaching financial freedom is almost guaranteed. An index fund is a popular term and is sometimes used interchangeably with the term ETF or exchangeraded fund. They are slightly different in nature, but for our
8:01
purposes today, you can think of them very similarly. To understand how an index fund works, I will first define what a mutual fund is. So, a mutual fund is when investors pull their money together and they pay a professional manager to actively pick stocks that the manager thinks will perform well. The manager will then charge a fee for this service and sometimes that can kind of eat into your returns. So, an index fund is a type of mutual fund. It just doesn't have an active manager. Instead,
8:25
it automatically tracks a stock index like the S&P 500, which are the top 500 US companies, or the Footsie 100, for example, that's the top 100 UK companies. You also have things like the NASDAQ and the Dow Jones. Now, since there is no manager actively picking stocks, the fees will be much much lower. So, essentially, an index fund would automatically track and invest all the companies in that particular index. And that way, all you have to do as the investor is buy the index fund that
8:51
tracks that index. If we pull up the S&P 500 index, for example, an index fund or ETF that tracks the S&P 500 would contain all of these 500 plus companies. So, by buying this one investment, you automatically will have your money split into all of these companies on this list. That includes Nvidia, Apple, Microsoft, Tesla, Meta, etc. This means you will get instant diversification to the top 500 companies and very low fees since there are no money managers. In
9:17
order to buy an index fund that tracks the S&P 500, you must research and know the ticker symbols of these funds. Now, a popular ETF that tracks the S&P 500 is ticker symbol VO. So, side note here, a ticker symbol is like an airport code. So, for example, you know how if you go to New York, you go to JFK airport, that's JFK. Or if you go to London Heathrow, the ticker symbol there, or the airport code is LHR. Investments that you can buy on the market have their own airport codes. Those are
9:45
called ticker symbols. So Apple, for example, is AAPL. Microsoft is MSFT, and Tesla's is just TSLA. You get the idea. I personally like ETFs and index funds, though, because sometimes picking individual stocks can be dangerous. As I mentioned earlier, if you want a further example, just look at Intel stock. So, if you bought it in 2000 at the high of $72 per share, you still today would not have recouped your investment. Compare that to the performance of the S&P 500
10:12
since 2000, which has returned more than four times since then. Individual names can be really great though, like they offer a lot of reward for the risk. So, for example, if you chose Nvidia, you would have done way better than the S&P 500, but the whole thing is is that you don't know which companies are going to do that good over time. That's why we just want to be consistent. And so if we're able to invest $6,000 a year or $500 a month into the S&P 500 consistently over a period of 35 years,
10:39
our total investment balance by the end of those 35 years will be well over a million. All right, so now you're probably excited about these ETFs. Now you're probably wondering, well, when should I actually invest? And this is a great question. I think the answer is as soon as you can. Many beginners will think it's too late to invest because the market has gotten too high or has hit all-time highs. But what if I told you that the S&P 500 spends about 8.3% of all trading days at all-time highs?
11:04
That's roughly 21 days per year when it's trading at a record level. And new all-time highs are usually followed by more all-time highs. If you're not invested on the big days when the market is up, you actually will miss out on a lot of gains. So, looking at this chart, if you missed just 10 of the best days in the market in the past 30 years, you could erase your gains by 54%. Missing 20 days will cost you 73% of your total gains and missing 30 days will result in
11:28
83% less. Paying a price that no one has ever paid before will create psychological resistance for sure. So, we need to acknowledge this and just understand that investing consistently over time will get us the results that we want. One of my favorite financial bloggers is Nick Majuli. I believe I said his name right. And he has a famous article titled Just Keep Buying. In this article, his main point is that quote, "Rather than worry about whether now is the right time to buy, just keep buying.
11:54
Market high or market low, just keep buying." He points out that as stocks get more expensive, their future returns generally decrease. So, this makes sense. If you buy an overvalued stock, it probably won't return as high as if you got in when it's much lower. He uses something called the PE ratio to explain this concept. Now, for the purpose of this video today, just know that the PE ratio is a metric that shows you how expensive a stock is relative to its
12:17
earnings. Think of it like a price tag. A higher PE means the stock is more expensive, and a lower PE means that it's cheap. You can see that as the PE ratio increases, there's a negative correlation here with your returns for the next 5 years. You can see all the red dots below the 0% horizontal return line. Red dots mean that the stocks have returned negatively. But here's the fascinating thing. As long as you hold for a longer period of time, watch what happens to your real returns, even if
12:43
you bought at an overvalued price. Looking at this interactive graphic, you can see as the years pass by, 5, 10, 15, 20, 25, 30 years, etc., the number of red dots decreases and converges over time. Nick states that quote, "Over any 20-year period, US stocks have had no real negative returns when including dividends, and over a 30-year period, the returns have generally converged despite some dispersion." So that basically tells us that we should be trying to grow our wealth very
13:10
aggressively and to do so we should keep buying. There is an excellent example here that if you search for the term stock market overvalued 2012 and you put that into Google many articles come up detailing what investors believed at that time which was that the market was overpriced by 50%. Now look at this graph of the S&P 500 in 2012 it was trading at the 1400ish levels. Now, if you had believed it was overpriced back then, you would have missed out on some
13:35
serious gains in the past 13 years. As right now, we are nearly 4.5x what we were back then. All right. So, in terms of how to actually invest the dollars, you can either do what's called lumpsum investing where you invest it all at once, or you can do dollar cost averaging. Both are valid strategies, but I think dollar cost averaging is easier psychologically. Dollar cost averaging is when you invest a certain amount of money at a regular interval in order to take away all the emotions of
14:00
investing. For example, instead of investing $12,000 all at once, you might invest $1,000 every month for 12 months. That way, when prices are high, your fixed amount buys fewer shares. But when prices are low, that same amount buys more shares. Over time, you will average out your purchase price, and this reduces risk since you're not putting all of your money in at a potential market peak. You're also more likely to automate this action and set it and forget it, which can take the emotion
14:26
out of investing. All right, so far we've covered a lot in this video already. Now, you're probably wondering to yourself, "Well, Humphrey, how much money should I actually be making in my own income or my own job before I actually start investing?" Many people will say that you should invest whatever you have, but I think the more important condition on whether or not you should start investing is how consistent can you actually be? If you're a teen or just out of college and all you have is
14:48
a $100 or $1,000 to your name, perhaps investing $100 is not that great. It might be better spent investing in yourself and on your own skills until you can get more of a consistent income to invest. Now, if you are someone making a consistent income and you can set aside a portion of money to invest and invest often, I think you will see the most benefits from investing. I personally started investing when I was making around $55,000 a year. And I would put a hundred to $200 a month into
15:14
my investment accounts. And whenever I got a bonus or tax refund, I would also put all of that windfall money straight into my investment account as well. In addition to knowing how much you can set aside for investing, you should also be self-aware about your own goals and tendencies. Which brings us to our next section, understanding yourself. I believe that you need to understand your own risk profile and your goals and your time horizon with investing. In other
15:36
words, are you someone who takes on a lot of risk? Are you okay with big swings and volatility in your accounts? Or are you someone who is more looking to keep the money that they currently have, but just have it grow at a slower pace? For example, if you're retiring in 5 years, your strategy will be more conservative than someone who might have 20 or 25 or 30 years left to invest. Your investing strategy when you have a longer time horizon can be tailored towards that. and what you invest in
16:02
might be different from what your neighbor invests in or what your friends invests in because all of our goals are different. The basic gist is that for most people that are working and have an income, the younger that you are, the riskier that you can be and the older that you get, you want to start adjusting your investments as you prepare for retirement. The reason being when you're younger, even if you lose some of your money by investing, you have a lot of time to make up for it
16:24
with your main job as well as time investing in the market. Again, the average of the market is between an 8 to 10% return over a long period of time. There are going to be stretches of years where you will lose money and it will also be flat for periods of time as well. Now, when you are older, let's say you are at the age of 60, you have less time to make up those losses because you need that money for retirement. And that is one thing I want to mention today.
16:47
When it comes to investing, it does carry some risk. It doesn't always mean that you're going to make 8% on average every year like clockwork. Some years might be up a lot. Some years you might be down a lot like during the financial crisis or the corona virus 2020 and some years just might be flat but over time you can expect it to grow if things continue the way they have been. Now before we get into our live example of buying a share on Robin Hood today I
17:11
just wanted to give you a quick summary on what I would do this year if I wanted to start investing. First I would understand why we want to invest which is what I've covered today in sections one and two. Second, I would open up a retirement account or a regular brokerage account to start investing, preferably with someone easy to use like Fidelity, Robin Hood, or Schwab. That would be your best bet. Third, I would probably invest in an ETF or index fund that tracks the S&P 500 or maybe the
17:36
NASDAQ. This is just going to be the most consistent investment that I can set and forget. And fourth is I would continue to learn and educate myself about investing. The more you understand about investing, the less scary it definitely becomes. All right, let's transition quickly to the live demo on Robin Hood now. All right, so now I'm going to show you guys how to buy a share of let's say ticker symbol VO in Robin Hood. I have my Robin Hood app pulled up and as you can see, this will
18:03
be the main screen. It'll show you your account balance as well as any account balances you might also have in the top. So, I have a Roth IRA with Robin Hood up here. I also have a traditional IRA with $0 and I don't have a credit card or joint account or anything up there. So, let's go back to the investing tab here. And then you can also see at the very bottom of the screen, you will have four different options. I'm in the bottom left, the investing, but they also have
18:27
a crypto section. Uh I don't even know why it said 648, but I have a crypto section. Then there's a search bar. Okay. Now, I've already pulled up the Vanguard S&P 500 ETF, but if you were starting this from scratch, you would probably click the search button and you could literally type in V, which we already had it right here. There's other ticker symbols of S&P 500 ETFs such as SPY. Uh you could do that as well. That's the Spyder S&P 500 ETF. But let's buy VO, the Vanguard S&P 500 ETF. And
18:59
you'll get to a screen like this. And right now, the market is open and we have about an hour and 15 minutes left before the market closes. So, I'm just going to go ahead and click trade at the bottom right here. And then I'm going to click buy. So, as you can see, this pulls up the order screen, and at the very top, you'll see it says buy VO, the number of shares that you that you want, the market price that it's trading for right now $611 and your estimated cost. So, if we put
19:29
in here one share, you can see that the estimated cost and the market price are the same. And then what we can just simply do is click review, and then it'll tell you an order summary. And then you can just swipe up to submit if you would like. I'm not going to do that just quite yet. I do want to show you guys the conditional uh type of orders that you can place with Robin Hood as well. So, I'm actually before I even click swipe up to submit, I'm going to click edit at the top left. This will
19:56
bring you back to this screen. And if you see in the top right here, you have this shares drop-own button. You can actually click on this. So, when you click on this here, you can see the different types of orders that you can make. You can buy in dollars. So, if you didn't want to buy one share, let's say you just wanted to buy $100 worth of VO, let's type let's actually tap in buy in dollars here. And you can type just tap uh type tap. Oh my gosh. You can tap you
20:22
can type in $100 and you click review. And as you can see, this will allow you to buy a fractional share of V.16378 shares as of right now. And you can also swipe up to submit this uh if you were to do that. Now, now let's actually not do that. Let's go back to the edit screen. Let's go back into the dollars. Hit the top right again. Go to the uh the menu selection here. You can see all these other types of investments you can make. You can make a recurring investment, which is what we talked
20:51
about in this video, the dollar cost averaging. So, if we wanted to invest in VO on a reg a recurring schedule, we could click on this here and then we could invest every market day, every week, every two weeks, or every month. So, let's say we wanted to invest every two weeks on a Tuesday. We could click continue here and we could buy $200 of VO every two weeks. We could press continue. Uh you could choose your payment method. I would always choose the buying power, not one of your linked
21:20
bank accounts. Or you could use one of your linked bank accounts, but I like the buying power since I already have $1,483 in here. I might as well just do that. And then if you click continue, uh this asks you if you want a backup payment. I'm going to skip that backup payment method. And you can see your order details here. And you would be able to review this and submit it. And basically every two weeks you would buy VO recurring, which is really great. That's almost what you want to do. Uh
21:47
please do this if you are able to consistently invest over time. I'm just going to go over one more conditional order for you guys. We're not going to get into trailing stop stop orders or stop limit orders today, but limit order is one of those more frequently used types of orders that you might actually use. So, if you click on limit order, this allows you to buy VO at a certain price or lower. I believe it said or lower. So, let me go check that again. Sorry. It lets you buy at a maximum
22:21
price or lower. So, let's say you wanted to buy VO, but you don't like the price of 610 and 18 cents that it's trading for right now. You could buy a share and then you could specify the price that you want it to actually go through. So, let's say you wanted to buy it for $600, which is $10 below what it's trading for right now. You could set this up. So, what you can do is you could set this to say, okay, when the price of VO ever drops to $600, I will then automatically
22:50
buy this share. That's the price I want to pay. And you can see that it says trading session 24-hour market. That means it's going to always be uh available to be executed. And then the time in force, this means that if you were to put this limit order in right now, it would actually expire at 5:00 p.m. today. So it's good until the 24-hour session close, which is at 5:00 p.m. today. I think that is zero UTC, I believe. That's neither here nor there. So February 15th, 2026. You can also
23:21
just like allow this to be good until February 15, 2026. That means if I were to submit this right now, let's let's actually do that. It actually won't buy. You can see that the shares purchased is zero of one. It won't buy the share until the price of V goes to $600. So, that's one way you can set your prices up. Otherwise, you can just buy what's called a market order, which is the initial order that we had at the very beginning of this tutorial. I feel like
23:49
we should just do that just for fun. Let's buy a share together. So, I'm going to go back. This remember this is the original way that we bought it in the first place. And I'm not going to choose dollars. I'm going to choose buy in shares. Let's buy one share of VO. It's trading for $61047 right now. You'll notice that our individual buying power went down because I have a limit order in place. So, it's actually using that that buying power. It's being reserved for that
24:15
limit order. So, if we wanted to get that buying power back, we would have to go cancel that order. But anyways, we still have enough money to buy one share of VO right now. So, I'm just going to click review and go ahead and swipe up and boom. Welcome to the investor center. That is a joke and I hope I hope that you got it. Um, but yeah, that's how you would do it and that's simple with Robin Hood. So, I like Robin Hood. You can also use Fidelity or Schwab or
24:41
wherever you may trade your stocks. I do believe that Vanguard has one of the worst UIs out there. So, I'd probably stay away from Vanguard even though it is quite reputable and it's a nonprofit. All right, guys. I hope that you enjoyed this tutorial on how to start investing this year. If you have any comments, please let me know down below. If you want to know how to buy a stock on Fidelity or a Schwab type interface, those are typically the more traditional
25:03
ones. I will leave a link down below to my previous video that I made in 2022 that shows you a live demo of that. If you're interested in another popular video about compound interest and wealth building, you want to check out my video on why net worth really explodes after you hit 100K. I will leave a link for it right here. Again, thank you guys for being here. I hope that this video helped you and if it did, please share it with a friend and I will see you guys in a future video. Okay, peace.
Here to help you learn
Sign in to keep a private conversation with your course tutor.
Ask me anything about the material…
Sign in to chat