focus on buying these five types of
assets and you'll become very very rich
there are five main asset classes to
know about when you get started
investing the ultimate goal is to own a
little bit of each asset class so you
have a really strong diversified
portfolio in this video I'll explain
each of these five asset classes in
detail and I'll also give you some tips
on how you can get started investing in
them even if you don't have a ton of
money to invest right now and before we
get started go ahead and hit that
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week the first asset class is equity aka
stocks or shares when you buy equity you
become a co-owner or a shareholder of
the issuing company if the company has
10,000 shares outstanding and you own
1000 shares then you own 10% of the
company as an equity investor you get
returns in two ways when the stock price
increases the market value of your
equity stake goes up which you can sell
at a profit so that's the first way you
can make money investing in stocks
the second way equity investors make a
return is via dividends since you're a
part owner of a company you're entitled
to a piece of its profits and you
generally receive that in the form of
dividends dividends are typically paid
quarterly and back in the day every
shareholder would actually receive their
quarterly dividend as a paper check in
the mail but nowadays you'll most likely
get an electronic deposit in your
account that looks something like this
there's two ways to buy stocks you can
either buy stocks via a fund which are
pooled investment vehicles or you can
buy individual stocks now if you want to
invest in individual stocks you should
only pick stocks and invest in companies
that you're knowledgeable about and it
does take a bit of skill and knowledge
to do that so I talk more about how to
assess companies and what factors to
consider when picking stocks in this
video right here and if you also want to
learn more about funds then check out
this other video right here so if you
want to invest in a fund then that's
gonna be really convenient for you
because funds package a bunch of stocks
into a nice diversified portfolio this
is the best way to earn the average
market return and benefit from the
wealth building upward trend of the
stock
get without having to go down the rabbit
hole of analyzing individual companies
because let's face it not everyone wants
to do that I personally love doing that
but it's not for everybody
before you can invest in stocks you
first need to open a brokerage account a
brokerage account is kind of like a bank
account but it's a place to hold your
investments instead of holding cash so
brokerages that you can look into our
fidelity Vanguard TD Ameritrade and
Robinhood the second asset class is debt
or bonds when you buy a bond you become
a lender so bonds are very different
from stocks because unlike equity
investors bondholders don't own anything
you're just lending money to the
borrower in return for periodic interest
payments which are typically semiannual
and then at the end of the loan you get
the original principal amount back you
can invest in either government bonds or
corporate bonds government bonds are
issued by governments in order to fund
infrastructure projects education and
pay for all the other things that
governments do corporate bonds are
issued by firms that need funding for
projects and initiatives to grow the
company so you can either buy government
bonds or corporate funds the number one
factor to consider when investing in
bonds is creditworthiness as long as the
borrower is in good financial shape
you're pretty much guaranteed the
interest payments and the return of your
principal but if the borrower goes
bankrupt then you're out of luck Moody's
Standard & Poor's and Fitch are agencies
that publish blood ratings to show a
borrower's creditworthiness so this
makes it easy for you to do your due
diligence before you invest your money
in a bond triple-a bonds are about the
safest you can get with basically zero
chance of default triple-a companies
have a lot of cash flow compared to
their debt payments so it's a very low
risk of default for you as a lender and
the further you go down the ratings
table you'll see bonds offering higher
interest rates obviously as a lender you
want to get as high of an interest rate
as possible but the key is to balance
that with the risk of not getting your
money back when you see a bond offering
really high interest that's because the
borrower is in shaky financial condition
and there's a high chance of you not
getting your money back so they have to
pay really high interest rates to
compensate for this risk for example
Argentina's government bond is paying
around 12 percent whereas US Treasuries
are paying
only around 2% and go figure Argentina's
defaulted eight times on its debt
throughout its history whereas the US
has never defaulted so that's kind of
how it works you know you get what you
pay for and something's too good to be
true then it probably is hey and if
you're liking this video so far give it
a thumbs up to let me know bonds are
considered to be safer than stocks
because when a borrower goes bankrupt
bondholders are usually first in line to
get their money back where stockholders
are usually the very last to get paid in
a default situation so you get a lot
less upside with bonds and with stocks
but it also comes with less risk if your
goal is to grow your money then you'd
want to invest most of your money in
stocks not in bonds that's why generally
for young people for basically people my
age around to in 20s and 30s then
definitely most of your money should be
in stocks you can invest in bonds using
the same brokerage account that you use
for stocks however the minimum
investment is usually $1,000 so unless
you have tens of thousands of dollars to
invest in bonds it probably makes more
sense for you to invest via bond runs
which are again pooled investment
vehicles just like stock funds except
they do bonds and they give you access
to a wide range of bonds with no minimum
investment some example of bond funds
you can look up to jumpstart your
research is the fidelity long term
Treasury bond index fund or FN bgx and I
shares Treasury bond exchange-traded
fund or IES the third asset class is
cash and cash equivalents so anything
that's sitting in your checking or
savings account or in your wallet that's
cash and cash equivalents also known as
the money market are securities that
earn a little bit of interest and can
easily be converted to cash any form of
debt that has a loan term of one year or
less is considered a cash equivalent so
that's CDs one month's Treasury bills
three months Treasury bills six months
Treasury bills repurchase agreements and
commercial paper have you ever seen
those news articles talking about how
some companies are sitting on tons of
cash like Apple they always have
hundreds of billions of dollars of cash
on hand that's obviously not sitting in
a bank account somewhere because banks
don't pay any interest and a company
like Apple wouldn't just wouldn't do
that so often in the business news when
you hear about companies
holding onto cash they're actually
parking it into cash equivalents like
the money market and that's something
you can do - there's no reason to be
sitting on tens of thousands of dollars
or even thousands of dollars of cash
when it's earning nothing in the bank
account
so this is where cash equivalents come
in one way you can invest in cash is by
purchasing shares in the money market
fund like FDL x x and vm f XX you could
also purchase CDs otherwise known as
certificates of deposit either either
through your bank or in your brokerage
account or you could just find a savings
account that earns decent interests and
park your money there I have heard of
some savings accounts that pay up to 2%
which isn't too bad I do want to point
out that cash and cash equivalents are
not an asset class for long-term
investing even though they pay a little
bit of interest cash loses its
purchasing power over time due to
inflation so it's a very very bad idea
to keep all your money in cash or cash
equivalents it's really just meant to be
a place to park your savings but it's
not gonna provide you the kind of growth
you get from stocks and real estate
which leads me to the next asset class
on the list real estate real estate is
property it can be residential office
commercial industrial there's two ways
to make money investing in real estate
kind of like stocks when property values
go up you can sell them at a profit and
you can also collect rental income as
long as you own the property real estate
is a lot like stocks in that sense it
gives you a combination of growth and
income and people who like real estate
like it because it's something tangible
that you can just touch and see and it's
a pretty simple asset class to
understand
paper assets like stocks and bonds are a
bit harder to wrap your head around
another benefit of real estate is that
it's the only asset class where banks
will lend you money to buy it you can
always get a mortgage to buy a property
but very few banks are gonna lend you
money to invest in stocks as long as a
cash flow from the property pays the
monthly mortgage you can use less of
your own money and still enjoy the
benefits of owning the property this is
called leverage and if used wisely can
generate a high return on your money
so in general real estate is the only
asset class where you can use leverage
to juice up your returns of course the
catch is that real estate is the most
capital intensive of all the asset
classes and buying any piece of real
estate is usually
going to require tens of thousands of
dollars if not hundreds of thousands
although a less capital intensive way to
invest in real estate is by investing in
rates or real estate investment trusts
REITs are basically shares of ownership
and companies that own huge portfolios
of real estate REITs are basically stock
and they trade like stocks and you have
to buy them in a brokerage account just
like stocks they generally pay nice
dividends and you'll never have to fix a
toilet or deal with property management
stuff like if you owned real estate
directly so REITs are also a great way
to get started in this asset class you
can also try out funding platforms like
fund rise Realty mobile and crowd Street
investing in real estate crowdfunding
deals is a lot like investing in reap
except that you're investing in private
deals versus publicly traded deals
however both of these options
crowdfunding and wreaths generally come
with less control and more fees so we've
covered the four main asset classes
stocks bonds cash and real estate I also
wanted to quickly mention some
alternative asset classes because
they're all there are other ones out
there there's precious metals so gold
silver platinum palladium
there's also fine art collectibles like
fine wine and exotic cars so these are
some other asset classes that generally
hold their value against inflation some
other ones you might have heard about
our hedge funds commodities and
derivatives these are mostly meant for
high net worth investors and it's
generally not recommended for anyone
who's just starting out so I'm not
really gonna get into that video here
stocks bonds cash and cash equivalents
and real estate are the basic building
blocks of a bulletproof financial
portfolio most of the growth in your
investments are gonna come from stocks
and real estate and you can use bonds
and cash for income and stability and to
make a small return on your savings for
more beginner-friendly videos about
investing make sure to also check out
these two videos right here and if
you're new to the channel hit that
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every week always remember to go after
your dreams unapologetically and to live