hey YouTube I'm Jimmy so in this video I want to talk about what I would invest
in if I had a 1000 dollars to start investing and I was just beginning out
then at the end of the video I want to talk about some things I do with my
investments now that I wish I'd known when I had first started that could help
juice up my returns a bit okay so know funny enough there's actually a right
way and a wrong way to start investing and when I was prepping for this video I
went over and I watched some other videos that tackled us a similar topic
and much of them said the same thing pay off your debt then save up and then
with some excess money go out and start investing and they're right that's the
right way to do it but I actually didn't do it that way and I suppose that my
spending habits early on weren't the best of habits and a lot of that changed
for me when I first started to invest see I actually opened my first investing
account I think was a trade or TD Ameritrade one of those I forget
whichever one didn't have a minimum balance because I only had about 500
bucks to invest at the time and I also had a car loan and I had $1500 or so in
credit card debt well I've saved up this $500 and I had every intention of paying
off my credit card bills but then I heard this story from Warren Buffett
okay so the story went something like this
Buffett was just starting out or at least he'd been doing it for just a few
years and although he was a millionaire already he wasn't worth anything near
what he's worth today and well he comes home one day and he sees that his wife
had gone ahead and remodeled their kitchen they she put in new countertops
new cabinets and refrigerator whatever it was and he stops and he asks her how
much did this cost and I figured what the number was was something like 10,000
20,000 30,000 something like that and the story goes on that Buffett was
annoyed and was angry that he couldn't understand why she would spend that much
on remodeling the kitchen and he explained that it wasn't the $20,000 or
whatever the amount was it was what he could have done with that $20,000 and he
said that hunt 20,000 could have been a hundred thousand it could have been five
hundred thousand or a million dollars that if he had an
time with that money it would have turned into significantly more money so
I put the $500 that I had in an investment account and I could have paid
off that or at least part of that credit card debt but I didn't instead I put the
money in investing account and I start looking for investments and I was
worried about how many shares I could buy with just a 500 so I tried to add as
much money as I could as often as I could because they were going to be
commissions when I did it this is before Robin Hood so I was going to pay a
commission so if I could only invest 500 or if I could only invest a hundred or
whatever it might be in any one position I was gonna get a commission and I
wanted to cut back on the impact of those commissions on my overall
investment and I put everything I could get my hands on into Viacom I worked at
New Balance at the time so I wasn't making a ton of money but it didn't
matter every time I got a paycheck I put as much as I couldn't to the investment
account and the rest of the time I would spend researching stocks and I ended up
building up to just short of $1000 about $990 and I found my first stock it was
Wyeth Wyeth was a pharmaceutical company that was eventually bought out by Pfizer
now at the time I want to say that while it shares we're trading about $30 a
share give or take I do remember that about 20 shares so we'll call it about
to $600 now at the time I had been reading a lot about investing and
learning how to invest in about options so at the time I thought that it made
sense to go on buy an option in addition to the shares that I bought so I bought
the 20 shares and then I bought one call option and that call option cost me
about $180 and it expired in like three months from when I had bought it now the
shares were just short of $30 I think and because I remember I had a $30
strike price well I got a little bit lucky and Wyeth ended up moving from
about $30 a share to about $38 a share over the next two months now my 20
shares that cost me about $600 well they're now selling for about seven
hundred and sixty dollars and my options on the other hand well I paid about $180
for them and they were selling at about 850 dollars since it was about $8 in the
money and there was still a month left so I sold everything why did I sell then
I have no idea like I said I was a billion experience at the time I think
that the stock actually continued to go higher but I was nervous I didn't really
know what I was doing so I jumped up so now I have about 16 her dolls in the
account which is more than what I own the credit cards so you may ask did I
pay off the credit cards and the answer is no way I was hooked I was an investor
now it wasn't a chance I was gonna take that money out of the investment account
so that's not completely true because over about the next year I did gradually
pay off the credit card but the way I did it none of it came from the
investment account well the way I did it is every check I
got from New Balance went to either living expenses or and I lived at home
so they weren't too bad or everything after that I split between the investing
account and paying off the credit cards and the only reason I paid off the
credit cards was because I wanted to put more money to invest into into the
investment account I couldn't stand out I had to make that payment so I figured
let me try to get rid of it now if I were smarter then at the time I
actually would have paid attention to what the interest rate were was but
frankly I don't even remember what it was I didn't pay attention to that at
all all I knew is that I wanted to put more money investing and that was the
only thing that mattered not again I paid off the credit cards just to get
more money to invest now just to finish up that story real quick my next two
investments actually didn't go so well so I had had great success with Wyeth
and the options so I figured I should just stick with the options and actually
did two different options I found one like a week later I did another one
bought a call option and then a week later I bought a call option for a
different stock I just bought one of each I figured that with this 1,600 I
could diversify spend about 150 hundred 60 60 bucks per each one I can get ten
different stocks in there well overall each one I had done about
three months out and over the next month or two I didn't really find many other
options I just had those two positions one stock went down the other one didn't
move much I forget what the companies were but as I sat there and watched it I
realized how risky these options actually were I was throwing away the
300 or so dollars I had invested in these two options and then I gradually
realized that that was much closer at a gambling than it was investing the
reasons I had for the stock to move over the next three months was fairly minimal
I always had the thought process of being a long-term investor but I was
only giving myself short-term opportunities with the options so today
I know a ton more about investing that I did back then so if I were advising
myself and I had else to start with what would I do well
the first thing I would do is I would stick with ETFs this allows for there to
be some built-in diversification now this is important since I didn't really
have the money to diversify myself now I remember at the time that I cared for
some reason about the number of shares that I bought I didn't want to buy let's
say just three shares about three hundred all stock so I looked at that
time I looked for companies that were trading near the twenty thirty dollar
range that being said I stuck with three etf's here that are in the twenty
dollar range that I would personally stick with if I were doing this today
now the first one is called the first trust North America energy
infrastructure fund ticker symbol EMLP it's got a yield of about four percent
and they invest in pipeline companies master limited partnerships utilities companies
like that and I thought this was interesting because energy commodities
have been down a bit so I figured that could make an interesting play in 2019
right now this ETFs trading at about twenty three dollars a share the fee for
this ETF is a bit high it's almost one percent it was ninety five basis points
but for a lot of people the solid yield helps offset some of that fee
now the next ETF is more of a swing at the future it's called the global
robotics and artificial intelligence ETF ticker symbol BOTZ now they invest in
companies that they believe will benefit from the increased adoption and utilization
of robotics and artificial intelligence they don't have any dividend and their
fee is decent compared to EMLP add just sixty eight basis points currently BOTZ
is a trading at about eighteen dollars a share now the last ETF I would consider
is called the global X super dividend ETF ticker symbol SDIV now as you can
imagine by the name that they pay great dividends currently the dividend yields
is a bit over 8% and they paid monthly which is nice as well they also have a
lower fee compared to the other two ETFs at about fifty eight basis points now
the other thing I like about this ETF is that their global so it helps because
it adds to a more unique style of diversification if we were to buy other
ETFs that were just us-centric it might not offer the same
diversification as a global ETF currently that ETF is trading at about 18
dollars and 50 cents a share now the final thing that I mentioned of the
start of the video about juicing up my returns actually has to do with options
each of these ETF have the options available on them and I was careful to
limit my search to ETFs that did have options because not all not all ETFs
have options available that being said I remember when I first started investing
and I had limited amount of capital to invest I wanted to find ways to juice up
my returns as much as I could now options many times appear to be a cheap
way to do it they're a very risky way to do it if you don't know what you're
doing but they can't help juice up the returns if you do it correctly now I
actually wouldn't recommend doing when I first did when I first started out and
that is buying a call and hoping the stock moves higher and instead what I
would prefer to do is I would prefer to let's say write a covered call to me
that's a must much better way to juice up your returns so in order to do that
you need up you need to own a hundred shares so for SDIV that's going to cost
you about eighteen hundred and fifty dollars now we only have a thousand
dollars so we put what we can into the into the account we buy as many shares
as we can and then the way I would do it from there is every dividend I got I
would try to reinvest in more shares don't forget they have an eight percent
dividend anything I could add to the account I would add to the account and
buy more shares once I got to the eighteen hundred fifty dollars I would
go ahead and I would write my first covered call now as curious what s di
B's options were going for so I went ahead and checked and right now we could
cut we could sell a covered call that expired in about three months for about
forty bucks so if you're wondering basically what that means is that you
would sell somebody the right to buy your shares your 100 shares at a certain
price by a certain time in our case right now the stock was going for about
eighteen dot forty six cents so pretend we had $100 we had 100 shares on our
average price was $18 and forty success we could sell a covered call with a 19
strike price giving them the option to buy those shares from us at $19 and in
return they would pass $40 today now in theory you take that money that they
paid you for the cover call and you buy more shares and if those shares get
called away from you in let's say the next three months well you bought it for
1846 you sell to $19 plus you get to keep the $40 that seems like a decent
move so far but if they don't get called away from you in three months you do it
again do that four times a year and that $40 turns into 160 to me that's a pretty
good way to add some return to ultimately what's call it an eighteen
hundred and fifty dollar investment even though it's possible you get there by
only putting the initial thousand in and reinvesting those dividends now
personally I like doing this for dividend ETF and dividend stocks as well
because don't forget when a dividend gets paid when the stock goes
ex-dividend date on the ex-dividend date the stock will drop by that amount
so if pays a $0.10 dividend drops by 10 cents plays a 20 cent dividend jumps by
20 cents that's great when you're selling covered calls because if you're
selling covered calls you don't want the stock to get above in our case $19 so if
it's getting close and that it pays a dividend not only do you get that cash
but the stock price falls slightly lowering the percentage that that stock
will get called away from you that's the reason with high dividend paying stocks
and ETFs so much of the returns come from dividends and not necessarily the
stock moving higher so that should increase the probability that we can
keep turning over the covered calls so to me that seems like a win-win so
hopefully you found this interesting and let me know if you've ever sold covered
calls or what you think of the three TS that I would be investing in today if I
were just starting out and I have links to in the description below for videos
on dividends and options and besides that let me know what you think of the
comments below you haven't done so already hit the subscribe button and
I'll see in the next video thanks and stick around