I remember when I first got into the world of the stock market, I started with penny
stocks, stocks that usually cost a few dollars.
I was so excited that I would read about every company, analyze its financial statements,
look at the recent news and try to pick the right company to invest so that the stock
price rises and I would sell it to make a profit.
I was inspired by the likes of Warren Buffett.
I mean this guy became one of the richest people in the world By picking the right stocks
and I thought I should give it a shot.
I didn’t bet all my money because I was inexperienced and I wasn’t ready to lose
the money that I hardly worked to earn.
Nevertheless, I kept going, but After a few weeks of actively watching the
stock market.
I hated it.
because it takes days if not weeks just to find the right company and even then you might
pick the wrong one.
You cant invest in every company unless your father will give you a small loan of a million
dollar and you won’t bother losing it.
Every company is trying its best to look like its doing great so that you invest in them
but they might be bleeding cash on the other side that you might not realize.
when the stock price goes down right in front of your eyes after you purchased it, you get
emotional, it's not easy to look at the chart and enjoy losing money.
You might not be able to control your emotions and would sell it at a loss.
But that’s the nature of the stock market.
If you are an entrepreneur or you have a day job.
You simply won’t have the time and energy to actively invest in the stock market, you
don’t want to simply throw your money without being confident that you will make more money
at the end of the day or at least won’t lose what you have invested.
So, I was about to leave this mysterious world of the stock market but luckily I came across
index funds.
An index fund is the best option for most people.
Its passive income where you do not have to do anything but enjoy watching how your money
grows.
When you invest in a single company, the risk is too high because if this company goes down,
you lose all of your money, but what happens if you invest in 100 companies, for example,
chances that they all will go down are low.
In fact one of them will go down, few others will definitely go up.
ANd that’s what index funds are for, they invest in every company in the market.
when you invest in an index fund, let's say in S&P500, you are investing in the top 500
publicly traded companies in the US.
It's like buying a share of the American economy.
No matter how many companies will go down, most of them, in general, are going to grow.
Unless the entire economy crashes as it happened in 2008.
And the great part about it is that there are index funds in every market.
But I prefer to stick to SP500.
I have more faith in the American economy than any other.
Now the main question is, how profitable are index funds.
In 2017, S&P500’s return was 19.7% which is incredible but a year after that, it was
negative 6.2%, you would be better off if you haven’t invested that year.
However, if you look at the bigger picture, over a long period of time, the trend is upward.
Over the past 90 years, the average return was almost 10 percent (9.8).
If you take into the account inflation, that would be 7 to 8 percent.
Still not bad!
if you would have invested 10K dollars in SP500 in 1942, it would worth today over 51
million dollars.
I am not sure why I am telling you this because You probably weren’t even born at that but
that’s a fun fact to know.
I will leave a link in the description to a calculator that would tell you how much
you will make if you invest a thousand bucks every month for over 20 years for example.
Before you start investing, I would highly suggest you to learn the basics of the stock
market.
Even if you are investing in an index fund, You should at least have an idea of how the
market works.
You can go ahead and read books or articles on this matter or you can save your time and
watch this short animated course by business casual on Skillshare.
I have watched this course and its one of the best courses on skillshare about the stock
market.
and the best part about it is that the first 200 of you who will use the link
in the description will get the course for free and 2-month skillshare premium subscription.
Hope this video was helpful, thanks guys for watching and I will see you in the next one.