- Rule number one of investing is, wait for it,
don't lose money.
This is the way.
Okay, the video's done.
Thanks for coming.
See ya.
Sounds pretty simple though, right?
All you have to do is buy today's hottest meme stock
then you're good to go.
This is not the way and a lot more risky than you think.
The bad news is that no matter how good of a trader
or investor you are,
at some point you're going to lose money,
at least on paper that is.
The good news is that as long as you start slow,
build some basic stock market knowledge,
and learn the fundamentals of investing,
you should end up with some pretty healthy profits
over the long run.
As a beginner investor, you should keep it really simple
to start out with while you get the hang
of investing in general.
Now, even though it's really tempting
to treat the stock market like a casino
and you'll load all of your money on some random penny stock
that's not how people become really rich
through the stock market.
If you wanna do that one day, then more power to you.
But for now, let's cover some of the basics
that a beginner needs to know
when it comes to investing
from someone who has been investing for years.
And that someone it's me, your uncle Jarrad .
We're gonna cover things like living off your investments,
how much you need to get started,
how to protect your investments,
the best way to invest, and a few more things
to get you started.
Real quick though please make sure to hulk smash
that thumbs up button
because this girl that I have a crush on
said that if I get enough likes on this video,
then she'll go out with me.
The fate of my future love life is now in your hands.
Here we go.
This video is a follow-up to the one that I recently did
on how the stock market actually works.
So go check that one out after this,
which will probably answer some additional questions
that you have.
I'll have that linked up down to the description
of this video.
One thing I wanna beat into your head right off the rip
is investing is for growing your money over the long-term.
Think five plus years
an income from your job that you have,
from the job that you have today is to pay
for every day expenses in the short term.
Try not to get those two things mixed up
because if you start trading stocks
with the intent of making some quick cash
to pay your bills today,
you're going to start making
some very risky investing decisions
which are going to reduce your chances of making money
and increase your chances of getting burned so bad
that you stop investing completely.
I know it's easy to see your investment account
go up by 100, 200 or $300 and think to yourself,
"Wow, that's enough to pay for some of my food this month
or cover some of my rent or mortgage."
But if you play your cards right
and keep that money invested,
and that money in there right now,
will be able to pay for multiple years of expenses
later down the line because it should continue
to grow over time.
When you constantly pull money from your investment account
when you don't actually need it,
your continuing to slow down the growth of your investments.
It's like expecting a tree to grow,
yet on the other hand continuing to come back,
year after year and chopping off the top of that tree.
Of course the tree is not gonna grow
because you keep showing up.
They're fricking cut it down.
What do you think is gonna happen?
You don't need much money to get started investing,
with a lot of these new brokerages, like M1 Finance,
Robinhood, and CashApp Investing offering fractional shares.
Starting with as little as $1 is easier than ever.
I know $1 doesn't seem like a lot
and that small of an amount isn't gonna give you
insane returns in terms of dollars,
but you've got to start somewhere.
As long as you're consistently putting money
into the account on a regular basis,
then building a six or seven figure portfolio
is going to be a lot easier than you think.
Consistency is the key.
The best way that I've found to learn a lot faster
is by actually getting your hands dirty.
So don't hesitate to start investing,
even if it's with just a little bit of money
just to learn the process.
I can teach you how to throw a baseball
and you can watch me throw a baseball,
but until you actually throw that baseball
you have no idea what you're doing.
(laughs loudly)
What the heck was that analogy.
But before you put a ton of money
into your investment account,
having a little pile of cash set aside
in an online savings account for non investing purposes
is going to give you a little bit more freedom
and increase your overall investment returns.
Yes, I'm saying that you having money
sitting in a savings account,
earning a trashy half percent interest rate
is going to increase your overall investment returns.
Let me explain.
Sometimes this is referred to as an emergency fund,
but honestly you can call it whatever the heck you want.
I don't care.
Now, the only reason it exists is to help you pay
for surprise expenses when they pop up
that you weren't planning for.
The reason this is going to benefit you when investing
is because when a random emergency happens,
like your car breaking down,
Miley Cyrus concert tickets going on sale,
your phone breaks or whatever,
you can pay for those things with your emergency funds,
as opposed to settling off your investments
to cover those costs.
And we all know you kind of get those Miley Cyrus tickets.
You see, when you first start investing as a beginner,
emotions are going to be at an all time high.
When investments are up, you're gonna feel like
you're on top of the world,
but when they're down,
you're going to question all of the decisions
that you made in the past.
And the last thing that you need to happen,
if your investments are down
is for one of those emergencies to pop up
and you start ripping money out of your investment account.
Next thing you know, you're selling off your investments
when they're down to pay for that emergency
because you didn't have a little money set aside beforehand.
Being forced to sell investments when they're down
is going to end up eating away at your overall returns.
Emergency funds are the most annoying thing in the world.
Trust me, because I hate having cash, just sitting around.
But think of an emergency fund,
like a little insurance policy for your investments.
But if it's gonna prevent me from interrupting
the growth of my investments
through selling some of my stock, then I'm okay with that.
I'm not saying to have a full
three to 12 month emergency fund in place
before you start investing,
because I think that most people should get started
with investing as early as possible,
but at least have a little something set aside
to begin with.
Now, as your investment account gets larger,
you should absolutely be growing your emergency fund
at a faster rate until you reach a level
that you're comfortable with.
Now, back when I only had a few hundred dollars invested,
I was okay with having a few thousand dollar emergency fund
at that point in time.
But now it's just not worth risking
a smaller emergency fund,
given how large my investments have grown to.
I get two questions quite a bit.
The first one is,
Jarrad how safe is investing in the stock market
if there just gonna take my money?
Or Jarrad how much money can I lose?
The stock market and especially the US stock market
is pretty reputable and safe at this point.
So there's really nothing to worry about
when it comes to safety.
As long as you use one
of the more well-known brokerages out there,
like Vanguard, Fidelity, M1 Finance,
and maybe not so much Robinhood anymore,
then you're good to go.
But what you invest in and how you invest in that stock
will determine how safe your money is.
Any sort of investment, no matter what it is,
comes with a level of risk.
You'll never be able to get away from that
whether it's with stocks, real estate,
investing in a startup, starting a business,
buying a franchise, a relationship or whatever.
If you wanna grow your money at a rate better
than if you just kept your money in a savings account
then getting comfortable with a little bit
of risk is going to be important.
I can tell you now
that just putting money into a savings account
as opposed to investing, will not build you wealth.
You'll actually lose money due to inflation.
Since the interest rates on savings accounts
are absolutely horrible.
I think that when someone asks how safe is investing?
What they really mean is how risky is investing?
When you invest for the longterm,
you'll eventually lose money at least on paper that is.
Money isn't actually lost until you completely give up on
and sell an investment.
As your investible assets grow,
there's going to be even bigger swings
with your money increasing and decreasing on paper.
There were months in 2020, where my overall portfolio
was down tens of thousands of dollars
because of the amount that I had invested
in the stock market.
But I didn't actually lose that money
because I didn't panic selling my investments.
Those were what we call paper losses not realized losses.
Don't treat the stocks that you invest in
like your past relationships.
You need to invest in those things.
You need to hug them.
You need to love them.
You need to hold on to them.
You need to give them more money.
What you invest your money into
will determine the level of risk involved.
The more risky it is,
the more money that you could potentially make,
but also the more money
that you could potentially lose as well.
If you invest all of your money into a couple of stocks,
then naturally that's very risky.
If all of those companies happen to be in the same industry,
then that makes it even riskier.
A portfolio that only holds Ford, GM, Honda,
and Toyota stock would be absolutely insane.
When the car industry takes a big hit for whatever reason
then you're pretty much screwed.
You've put too many eggs in one basket.
When you pick individual stocks,
think about looking for companies
within different different industries
to spread risk out just a little bit more.
Don't be afraid to invest in multiple stocks
within the same industry of course,
but make sure that the majority of your money
isn't concentrated into the same one or two industries.
Safer investing is all about understanding
your personal level of risk,
and building out a portfolio of investments
to match that in a way so that when they're down in value,
you don't panic sell and lose all of your money.
There's really two different ways to invest.
Now, pick one to begin with,
so that you can reduce as much confusion as possible.
But for beginners,
I would recommend one over the other at first,
and I'll explain why.
The two types are active and passive investing.
There's nothing wrong with either one
but it's more of a matter of personal preference
than anything.
You can technically do both if that works for you,
and I'll explain how that's possible in just a minute.
With active investing,
you're doing a lot of the work to go out there
and find stocks that you wanna add to your portfolio
on a regular basis.
You're actively pulling up a stock to analyze the company
at a deeper level, to understand if you wanna purchase it,
the price you wanna try to purchase that stock at
and what your exit strategy is going to be.
Not always, but sometimes this type of investor
is also actively selling stocks on a more frequent basis,
to either cut their losses,
take some of the profits that they've earned
from the stocks that have increased in price
or try to get in on stocks early that have a lot of upside.
An active investors doing a lot more
which is why they're called wait for it active investors.
Third Twitter.
If you're someone who's interested
in digging into the fundamentals
and enjoys continuing to monitor stocks,
then this style of investing is for someone like you.
There's a lot that goes into this investing style.
So I wouldn't suggest thinking about going this route
for a beginner just yet.
If you do it properly then active investing
is more time intensive.
So you're going to need to be able to set aside
a few hours every week to dig into the investing data
on a regular basis.
If that doesn't sound appealing to you
as a beginner investor or thinking about having to do that
is making your head spin,
then that's perfectly fine.
Passive investing is going to be a better way to start
for 99% of people, because that's a lot easier to do,
understand, and a little more straightforward.
With this type of investing,
you're not actively trying to buy and sell stocks
on a day-to-day or week-to-week basis.
A passive investor will sometimes do this,
but more often than not,
they're going to kind of just buy something
like an index fund or it's ETF equivalent
and hold onto it for a long period of time.
Since an index fund will expose you to hundreds sometimes,
thousands of stocks,
your risk is automatically spread out among enough companies
to where it's not something that needs to be monitored
on a regular basis.
You kind of just buy the index fund and forget about it.
I'll have my video on everything that you need to know
about index fund investing down in the description
for you to check out after this video.
Also keep in mind that you don't have
to pick one way of investing and stick with it forever.
You can dabble in both at the same time,
or even switch from one to the other as time goes on.
An example of someone who utilizes both investing styles
would be a person who invests passively
in his or her retirement accounts,
but as is an active investor
within their taxable investment accounts.
I have friends who dabble in both
and it works out perfectly for them.
So I can't knock anyone who wants to do both.
But at first, I would suggest sticking
with the passive method
until you get a little more hands-on experience
with how the stock market works
and a good understanding of how you personally react
to certain things that happen when your money is invested.
After that, if you wanna start playing around
with picking individual stocks,
then allocate a small amount
like 10% of your total money invested
towards that sort of thing.
If you find that you were starting to really enjoy it,
then increase that amount.
As much as I love everything about investing
in the stock market,
I'm personally more of a passive investor.
About 90% of my money in the stock market
is in index index fund ETF like VTI or VOO.
And the remaining 10% are in other things
like individual stocks and speculative investments.
As a beginner, you're going to wanna
start investing your money into a tax advantage account
like a Roth IRA before putting money into a taxable account.
This might not seem like a big deal
but it is when it comes to saving money on taxes.
Not all investment accounts are created equal
and not all brokerages offer the same of type of accounts.
For example, Robinhood and CashApp Investing
only offer taxable investment accounts
at this point in time.
But brokerages like M1 Finance, Vanguard, and Fidelity
offer a Roth IRA.
I have a whole video of breaking down what a Roth IRA is
and how to invest in one
that I'll link up down in the description.
The difference between a Roth IRA
and a taxable investment account
is that you'll never pay taxes
on the money that you withdraw from a Roth IRA,
but you will pay capital gains tax
on money that you withdraw
from a taxable investment account.
So if years down the road
you withdraw $1 million from a Roth IRA,
then you'll get to keep that full amount
and not pay taxes on any of that money.
But if you withdrew that same $1 million
from a taxable investment account,
then you'd have something like a 15% capital gains tax
which would come out to a tax bill of about $150,000.
This would only leave you with $850,000 leftover.
That's a $150,000 savings
just because you invested money into your Roth IRA
before investing into a taxable investment account.
I'm not saying don't invest your money
into a taxable investment account,
but make sure that you max out your retirement accounts,
before we even messing with taxable investments accounts.
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Check out the description for more resources and playlist
to help out with all of your personal finance
and investing needs as well as some ways
to get some free stocks for yourself.
I'll see you in the next one friends, I'm done.