(futuristic sounds)
- So this seems to be a popular topic on YouTube,
I've seen a lot of other people talking about this
and I kind of thought it would be interesting
to give you guys my two cents on this.
So this is basically how to invest 1000 dollars.
I have, like, the four places that if I were starting off
and maybe I was 18 years old.
Let's say that I had saved up a thousand dollars
from working a summer jobs,
and I was looking to get into some kind of investment.
You know, I have some extra money around.
Here's what I would do with your money.
And, some of these answers might be kind of,
I don't know.
All I know, all I can say is this is not what I would
have wanted to hear when I was 18 years old.
And the primary reason is because a lot of people
have this idea in their head that they can just go
invest in a stock and they can make, you know,
ten times their money,
or a hundred times their money,
in a short term period.
And unfortunately there's a lot of very deceitful
people out there in the realm of stock market trading.
And a lot of people are pushing people towards, like,
penny stocks and stuff like that.
And those are just not realistic returns to expect
from the stock market.
And I wouldn't recommend ever going in to an
investment in, like, a penny stock or anything like that.
Because those are for very experienced investors who are
comfortable with a substantial amount of risk.
So, just I wanted to throw that out there at first.
If you guys are like, thinking about buying a stock,
do not buy a penny stock.
And I'm gonna be doing a video soon, really going
in depth about penny stocks and the reasons why
you should avoid them like the plague.
Personally, I've never invested in a penny stock
and I probably never will.
I do talk about them on this channel sometimes
just because it's a popular financial topic.
And I kind of studied the trends on YouTube and I
see what people are searching for.
And I make videos a lot of the times,
based off of search trends.
So I do talk about them just to educate people
but personally I don't invest in them,
and I really don't advise most people to either.
So before you want to start investing,
there's a couple things I recommend that you do.
The first one is pay off any high interest debt
that you have.
So let's say you have like a credit card and
you're paying, I know personally on my Discover Card,
my interest rate is 19 percent a year.
I never carry a balance on it but lets say
for example, I had credit card debt.
And every year I was paying 19 percent interest on that.
You are not going to invest your money
in anything that's going to give you better
than a 19 percent return.
So pay off any high interest debt that you have
before you even consider investing in form.
Even as little as 1000 dollars.
Because, odds are, that you're never going to find
an investment that's going to make more than
what you're paying in interest.
Now, the one thing that I will say though,
like lets say you have a car loan.
So for example, I have a loan on one of my cars.
And I pay, like two point five percent interest,
it might even be less than that.
It's pretty low.
So I don't pay, I didn't pay my car loan off before
I started investing in stocks and mutual funds and
things like that, because I'm confident that I can
beat a two and a half percent rate of return per year.
So I know that paying off that car is not going to
be better for me than making my, you know, making
a little bit more money in interest off of an investment.
So that's the one thing I would say if you have,
like, a car loan or maybe very low interest student loans.
Maybe that's something that you can say, okay, I can
invest while paying those down each month.
But if you have high interest credit card debt,
definitely do not invest until you have that paid down.
Second thing you want to do is you want to make sure
that you built up a six month emergency fund.
This is a mistake that I made when I first
started investing is I had put all the money I had
into stocks.
And I ended up deciding to buy a car.
And I talked about this story before, didn't
consider the fact that I had to pay taxes and
DMV fees on that vehicle.
And I did not have the money in my bank account to
pay for that.
So I had to take money out of the stocks
that I was investing in at the time.
And luckily, I wasn't down on the stocks but if you were
down on your investments and you had to sell because
you needed the money, that's a very bad position to be in.
So I would not recommend investing money without
having a six month emergency fund built up.
And the other thing to consider as well is
any unforeseen expenses.
The biggest one for me that I see is car repairs.
So last August I had to spend over 2000 dollars on my car
out of nowhere.
And if you don't have the money to cover that expense,
you could be stuck in a position where, again,
you'd have to liquidate your assets,
whether or not they were up or whether you
were at a bad market, you were forced to sell.
You never want to be in a position where you're
forced to sell, so do not invest money in stocks or
any kind of investment until you have a cushion
built up for those unforeseen expenses,
and for emergency expenses as well.
The advantage to investing early is that it's going
to allow you to take advantage of compounding over time.
So the earlier you start and the longer that you
give that money to grow, the more it will grow
based off of compounding,
where the interest you're earning, earns interest over time.
So let's say you had a dividend stock,
the dividends that you earn,
if you reinvest those in the stock itself,
buying more shares, you can take advantage of compounding.
And those dividends will also earn dividends over time.
So the longer, obviously, that you let that happen,
the more money you will grow to have over time.
So the earlier you start, the better it is.
The other good thing too, like,
let's say, you're somebody like me.
At that age, when I was 18, 19,
that's when I first started reading about the stock market,
getting into stocks.
But I didn't invest until I was in my 20's.
But that was when I first started researching about it
and educating myself, because I was always fascinated by it.
The good news about that, guys, is if you really want to
get involved in the stock market, this is the time to do it.
Because you have the most risk absorption at this time.
So you're not going to be, like, worried about
in the most cases, you know, paying for your mortgage,
paying for family, paying for kids and stuff like that.
When you're, you know maybe you're in my position,
where you're still living at home or you're,
maybe you're renting somewhere, you don't have a kid yet
you don't have any crazy expenses.
This is the time to do that because you have some more
absorption for risk and you have more time in your life
to basically save up money and dig yourself out of a hole,
let's say if you ended up losing money.
So this is when you have the most risk absorption.
And then the other thing,
I already talked about this already.
Don't expect to pick a stock that makes you 10,000
or 100,000 dollars in a short term.
Now if you invested and left that for 45, 50 years,
yeah you could probably have 10,000 or 100,000 dollars
based on what you're investing in,
because you gave it so much time to grow.
But if you were trying to make 1000 dollars in six months,
or if you were trying to take 1000 dollars and go 10X
in the next year or five years, it's very unlikely.
So don't have that kind of expectation in your mind
because that's not a realistic stock market return.
Anyways, so these are the four things I would do
if I were to invest 1000 dollars.
The first thing, number one that this is actually the
first thing I did when I invested was invest in
index funds or mutual funds.
I decided to invest in mutual funds.
But basically, you want to invest in a low fee index fund
or mutual fund.
So make sure you're shopping around and considering
how much the fees are, associated with that mutual fund.
Make sure it's worth while for you.
So what is an index fund?
What is a mutual fund?
An index fund is basically a blend of stocks
that provide broad market exposure.
So you pick an index you like.
Maybe you like the semi-conductor industry.
Maybe you like the oil industry.
Maybe you like retail.
What you do is you invest in an index
which gives you broad exposure
to many stocks within that industry.
And the advantage to that is you're highly diversified
so if any one company goes down,
the other companies within that blend of stocks
would offset that loss.
Whereas if you invested in one individual company
and the index as a whole outperformed that stock
or that stock did terrible and everybody else did fine
because that stock had bad company news going on about it
or something happened within them,
you're not going to be affected by that if you're in an
index fund of many stocks.
But if you're invested in just one stock,
you have that risk.
The mutual fund is basically a professionally managed
investment program in diversified holdings.
So basically, you're paying somebody a fee
out of your investment to basically,
they're managing the money.
They're allocating the money and moving stuff around
and you're not even doing anything.
So you're basically paying for professional management
of your money.
And the idea is many people collectively pool their money
into a large fund and that fund itself is managed by the
money managers and everybody associated
with that mutual fund.
So here's the interesting fact to point out to you guys.
Just if you're considering investing in individual stocks,
and I'm sure as you guys know, if you watch my videos,
I invest in individual stocks myself.
So I'm not saying that they're bad.
But this is just something to consider.
From 1997 to 2012 the All Index Portfolios,
so those are portfolios that were consisting of
all index funds, outperformed actively managed funds by,
83.4 percent of the time.
So 83.4 percent of the time, the professional stock pickers
did not outperform index funds where they were just
broad exposure to the whole index,
or the whole industry.
So that's just something to consider,
is the professional stock pickers can't beat the index funds
83.4 percent of the time.
So as a beginner stock market trader,
your odds are against you.
But here's the thing that I don't like about mutual funds
and index funds, is that they're extremely boring.
There is little involvement on your part.
And there's little to learn because it's kind of a
set it and forget it type investment.
So you basically, invest in your mutual fund
and you just forget that you even have it
and then 30, 40 years later you open it up and go,
oh look at that, I have a lot of money.
That's basically mutual funds in a nutshell.
There's not a lot to learn about them.
I mean, you can decide what funds you want to invest in.
Maybe you're looking for a global fund, or just one on,
just certain markets.
Whatever you're looking to invest in.
But besides that, there's really not lot to learn
and there no real involvement on your part, with them.
So that's the disadvantage, is if you're trying to learn
about the stock market, you're not going to learn a ton
by investing in mutual funds
because there's just not a lot to learn.
It's a very passive investment strategy.
I do have money in mutual funds but I also do the
individual stocks too because I like learning
and I like being active with my investments.
Also having some passive but some active investments.
And just a couple of examples of
places you could get mutual funds.
Probably the number one is Vangaard.
Number two is probably Franklin Templeton.
That's where I have my mutual funds.
And then these two are kind of new:
Betterment and Wealthfront.
They're considered robo-advisories
Or robo-advisor services, where they basically have,
basically computer programs automatically adjusting trades
and doing the management based on computers.
And the idea with that is less human involvement
means lower commission costs
so it's a cheaper investment strategy.
Personally I don't have any money with Betterment
or Wealthfront.
At some point I do want to look into that though,
just out of curiosity.
Okay, so number two.
So we, I said the first thing I would do is invest in some
mutual funds.
But if you want to learn more and you really want to learn
about the stock market,
you're best bet is to invest in stocks.
So stock picking shouldn't be your
primary investment strategy.
It's not mine and unless you're really, and this is what you
want to do full time and you want to be learning as much as
you can about stocks and studying them day in and day out,
maybe you'll have a lot more money in stocks but most people
set aside a percentage of their portfolio
towards individual stocks.
For me, it's less than, less than 25 percent of my entire
portfolio, is in individual stocks.
That's probably a healthy amount in total.
Maybe you'd want to have much more than that.
But like if you're younger and you're looking to
learn about the stock market, investing in
individual stocks isn't a bad idea.
So what I would recommend that you do,
is pick one company that you really like.
Don't worry so much about what the stock is doing right now,
because you're looking at a long term investment.
You're looking to buy a stock.
You're looking to hold it for a long time and
kind of learn about studying company fundamentals,
and looking at charts and checking your stock,
and keeping track of how much money you're making.
And looking at dividends.
You're not looking for a short term investment,
at this time in your life.
So I would recommend, pick a company that you really like.
Maybe you're into wrestling and you want to invest in WWE.
Maybe you really like Disney.
Maybe you like Coca-Cola.
Maybe McDonalds.
Whatever it is.
Maybe you really like Apple.
Pick a company that you really like and invest
in that company.
Now if you're not partial to any certain company,
what I would recommend is look for a well-established
company that pays a dividend.
So find a nice dividend stock, for a long term investment.
Because that's where you can take advantage of the
compounding so over 20, 30 years,
if you're reinvesting your dividends,
you're gonna have a lot of time for your money to compound.
So that would be what I'd recommend as well.
Now this is a huge question I get all the time.
People are like, okay, so if I'm investing 1000 dollars,
should I buy ten different stocks?
And my answer to that is no.
I would buy, at most, two different stocks.
500 dollars in each stock.
That is because there are commission costs
associated with your investments.
So for me, I personally trade with Scottrade and it's
seven dollars per trade.
So when I buy stock, I pay seven dollars.
When sell stock, I pay seven dollars.
So let's say, for example, you put 100 dollars
into a stock, okay?
When you bought that stock you paid seven bucks
and then when you sold it, you paid another seven.
So there's 14 dollars or 14 percent of the total value
of what you have invested out the door right there.
So in order to make your money back on that investment,
the stock has to come up 14 percent in value just for you to
break even.
So for that reason, I recommend having enough
skin in the game that you can offset your commission costs.
So I would say if you're investing 1000 dollars,
at most pick two companies and do 500 dollars in each.
I don't personally recommend that anybody
invests less than 500 dollars in a stock.
Unless you're investing in some other form
that, where you're not paying commission.
I don't know, there's a lot of, there's a lot of
investment, and there's a lot of stock brokers
out there and they all have different features and stuff.
I don't know, I just use Scottrade out of convenience but
I know a lot of people have reached out to me and
talked to me about like, low commission trading,
and, I don't know.
If you guys know of a way you can invest without paying
commission, you know, more power to you.
But if you're paying commission on your investments,
consider that you need enough skin in the game
to offset your commission.
Okay, number four.
I'm sorry, we're on to number three.
That's why I'm screwed up.
Number three.
This is my favorite way to invest 1000 dollars
and this is like, what I recommend what you guys do.
Above all else.
Invest in a side hustle.
So start your own business.
This is the type of investment where you could see
a 10 X or a 100 X return, is when you're investing
in an actual business yourself.
So I wanted to just give you a couple of examples
of things you can start for under 1000 dollars
or for 1000 dollars total.
Number one, start a YouTube channel.
So I started a YouTube channel.
I spent less than 1000 dollars to get started.
You know, bought a decent camera, bought some lighting,
bought a white board, some markers.
And over time now, I'm upgrading stuff,
and kind of improving things.
But at first it was very, it was very cheap to
get this started.
And if you have something that you're super passionate
about, for me it's, you know, stock market, as well as
nutrition and fitness, and just overall well-being.
That's kind of what I'm passionate about.
It's like personal development and just,
I've always liked teaching people.
So for me, that's like, what I enjoy doing.
I was able to turn my passion into a little
side business that actually does make a little bit of
money, here, with the ad revenue on the channel.
So start a YouTube channel.
Start a photography business.
If you really like photography, invest in a good camera.
And start doing, like, wedding photography.
Something like that.
You can do face painting.
This was interesting too.
Maybe you get all the supplies needed to do facepainting
and you start doing kids parties on the weekends.
Maybe you want to go be a clown.
Buy a professional clown outfit and do that.
I mean, I know this sounds kind of silly but you
can make money doing this stuff, guys.
Invest in the resources needed to start a blog.
So this is probably one of the cheapest ways, because
all you got to pay for is basically, you know,
website hosting and stuff like that.
And that's pretty inexpensive.
Maybe some graphic design.
But start blogging about
stuff that you're passionate about.
If you're self conscious about getting in front
of the camera.
That's an option too.
Another one, be an eBay reseller.
So, go around on Craigslist or go to garage sales,
and buy stuff that you can resell on eBay for a profit.
That's a popular way to make money too.
Starting a landscaping business.
If you want to, if you really want to be working outdoors,
you know, start a side business doing landscaping.
That's an option too.
And then any kind of consulting.
So start a consulting business, or a tutoring business.
So if you're really good at something,
people will pay you for your advice.
And set up some kind of platform where you could
find customers or find clients and do consulting for them.
And then, what I would recommend is commit all revenue
from that side business to the purchase of
income producing assets, because that is what you call
a cycle of wealth.
So all the money that you're making, would then
make you more money.
That's probably the best thing I would do
if you guys are looking to,
if you're not afraid to work and put the work in,
invest in a side hustle.
Start a little side business.
Number four is investing in yourself.
So this would be improving your skill set to
maybe earn more money at your job.
It could also mean learning a skill that you could teach
others so that kind of ties into starting a side hustle.
Maybe you spend 1000 dollars taking courses yourself
and learning as much as you can about a certain topic.
And then you turn around and you can do consultations
with others.
Or you start a YouTube channel, educating people about that.
So that's something else you could do.
Or you could just take that money and learn as much
as you can about money, money management and personal
finances, so that way, in the future, you will have
a skill set that will help you earn more money
in the future.
But anyway guys, that's pretty much
all I got for this video.
This would be the four places that I would
recommend investing 1000 dollars.
Number one, I would say, being, investing in your own
side business.
This is the best thing to do.
Number two, probably investing in a mutual fund.
I know I had these, just kind of an order here.
That's not the order of like, what I would do these in.
But you know, if you want to learn a little bit more
about investing, that would be investing in a stock.
And then, you know, making an investment in yourself,
and educating yourself.
That's probably what I'd recommend doing,
especially at the age of 18, somewhere around there.
But, if you guys enjoy this video, please drop me
a like below.
And if you're looking to learn more about investing
in the stock market,
I do have my beginners guide to stock market trading,
which I will link up in the description.
And there should be an annotation popping up on the screen
here as well.
So you guys can check that out if you're interested.
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And thank you guys for watching this video.
(upbeat music)