How to Invest for Beginners (2024)

so let's say you want to get started with this investing thing you might have a bit of money saved it's probably not enough for a house but you decide you should probably invest it in something you could invest in stocks shares equities government bonds corporate bonds real estate foreign exchange crypto nfts Futures Fine Art watches there seems to be tons of stuff out there and you might have even seen those ads on YouTube from the gurus talking about day trading and trading foreign exchange and how you could make money in that way through investing and on top of all of this confusion there's the very real fear that you might lose all of that money that you've worked so hard to save up so in light of all of that this is The Ultimate Guide to Investing For Beginners and we're going to split this video up into four parts which are going to be time stamped down below so you can skip around if you feel like it part one is going to be about the basics and the philosophy behind investing part two is about why and how to invest your money in stocks and shares in part three we're going to be addressing common fears and questions and concerns about investing like what if I lose all my money and then in part four we're going to talk about fast lane investing which is an alternative approach to the traditional investing thing to build wealth part one the philosophy and the basics of investing so let's start by talking about what is the point investing the point of investing is for your money to be able to make more money so let's say you start off with a thousand dollars that you've saved up through your hard-earned labor now you could put that money under your mattress or you could put it in a bank current account but the problem with that is that there's this thing called inflation that you might be reading about on the news and so your thousand dollars might be able to buy you a MacBook Air right now but a few years from now when inflation goes up that MacBook Air is going to cost twelve hundred dollars and so over time your money loses its purchasing power which is why you want to ideally invest in something because when you invest in something your money grows magically on its own more on that later and that means you can combat the effects of inflation and that brings us to the next question which is how does the money magically grow in the first place and generally the philosophy behind investing is that you buy something now and that something makes you more money over time and there are two ways in which the thing that you buy can make you more money let's say you buy a house it costs a certain amount of money to buy a house right now but there's two ways the house makes you money number one you can rent the house out and so you're getting rental income every month and secondly hopefully in theory the value of the house will also rise over time if you hadn't bought the house and you just had that money sitting in a bank account and over time you're going to be losing money because inflation is going to eat away at your savings now houses are an interesting example because you get rental income and it's very easy for us to imagine what that looks like everyone pays rent and so you're making money but with most other asset classes you don't have this equivalent of rental instead a lot of these things you're buying and then you're hoping that you can sell them for a higher price over time the main exception to this is some stocks and shares which we're going to talk about a little bit later in the video and these asset classes is a long list of things that you probably have heard of but you might not be entirely familiar with you know we've got stocks shares and equities which are kind of the same thing we've got hedge funds we've got index funds we've got bonds government bonds corporate bonds you might have heard some people investing in watches and then fine arts you've probably heard of people investing in crypto and even gaining Lots or losing lots in my case or losing quite a bit of money because crypto has crashed recently and a lot of this can get very complicated quite quickly and so we're going to simplify things and for the rest of this video we're going to talk about investing in stocks and shares because that is the main kind of investing that normal people like you and me can unlock fairly easily you don't need to have large amounts of money which you need to invest in a house you don't need to take on huge amounts of risk and gambling and stuff like you need to do with crypto and you don't need to be an accredited investor or anything like you need to invest in like ancient investing companies or all this fun stuff so stocks and shares are kind of the basics of investing and usually when people talk about investing their money what they're referring to is I want to buy some Tesla or I want to buy some Netflix or I want to buy some Amazon and so we're going to talk about that part two why and how to invest in stocks and shares so when you're investing in stocks and shares for example you're basically buying a percentage ownership in the company that you're investing in so let's say I wanted to buy shares in Apple for example apple is a publicly traded company which means the public can trade Apple stock now in a dream world I would just be able to go to apple. com forward slash buy and I'd be able to buy a stock of Apple and now I own some percentage of the company in reality I can't do that directly I have to go through a middleman which we call a broker but once I've gone through this middleman platform I now personally own a piece of Apple now I can make money from stocks and shares in two different ways firstly I could make money because I'm hoping the price of Apple or whatever stock I've invested in is gonna rise over time so 10 years later I could sell it for a lot more money than I bought it fingers crossed but the second way in which you can make money through stocks and shares is similar to how you make a rental income on a house because certain companies will pay what they call dividends so for example in the UK there's a company called BT British Telecom and they pay dividends so when you own a piece of BT you're not just hoping that the price will rise over time they're also literally paying out some of the profits that the company makes to their shareholders and so if for example you were ridiculously rich and you owned 20 of BT then every time they declare a dividend which might be every three months you would get 20 of the profits that they are Distributing to shareholders in reality you and me we're probably not going to own 20 of a huge company like that because you put that would cost absolutely billions but instead we might get you know ten dollars fifteen dollars twenty dollars like five dollars 5. 47 here and there and if we invest in lots of companies that are paying out dividends then it feels like you've got this free kind of rental income but really it's profits from these companies coming into your account every month and that's pretty cool so at this point okay cool you can now buy stocks in these different companies you can own a small percentage offset company but how are you supposed to choose which companies should you put all your your money in apple or Netflix or on Disney Plus or should you go with a shell or British Petroleum or Ralph Lauren or like I don't know Unilever or you know these brands that you might be familiar with now at this point people have varying different opinions on the matter but I'm gonna cite Warren Buffett's opinion on this which is also my opinion on this which is that if you're a beginner to investing unless you are legitimately a financial professional who literally does this full-time for a living you should not try and pick stocks the average person will not know enough to know which stocks to buy they won't know enough to know when to buy them but they don't have to because if they can buy all of America through an index fund because realistically you and me we're not really going to have an insight into oh I reckon Apple's going to do really well because whatever or I reckon Disney's going to do really well because whatever there are literally Financial professionals whose full-time day job it is to do that kind of analysis and even then they don't get it right A lot of the time and so what you can instead do is instead of worrying about stock picking what you should do probably not Financial advice LOL is invest in an index fund and that begs the question what the hell is an index one well an index fund is a fund and a fund is a basket like a group of stocks and shares or other things but stocks and shares for example and the index component means that this fund tracks a particular stock market index for example in the US there is a really famous Index Fund called the SNP 500 and this is basically the top 500 biggest companies in the US and you can see here these are the components of the S P 500 right now so Apple makes up 6.

4 percent of the S P 500 because it's big company then we've got Microsoft Amazon alphabet which is Google Berkshire Hathaway which is Warren Buffett's company alphabet Class C which is also Google Nvidia Tesla Exxon Mobile you might be familiar with quite a lot of these companies but if we scroll all the way down to the 500th company we've got I don't know Ralph Lauren and Hasbro and didn't realize Hasbro was in the S P 500 but you can see that Hasbro makes up 0. 21 of the S P 500 compared to Apple's 6. 4 because those companies are hugely different in I guess market cap or valuation right so the point of the S P 500 is that it gives you a single number that you can graph over time of like how value able the U.

S stock market is because to be honest most of the value of the U. S stock market is in these 500 companies and so if the value of these 500 companies are slowly increasing over time which It generally does that means the U. S stock market is doing well and these companies are doing well and life is all good if for example you're in a recession where the stock market is going down or if for example covert has just become a thing and the stock market has gone down that means that collectively people have decided that the value of these stocks is lower than it once was and so the graph will go down in those moments so what does this all mean for you and me as normal retail investors well basically what it means is we can invest in an index fund so let's say I put a thousand dollars into the S P 500 Index Fund that's very good because it means that my thousand dollars is now split between 500 of these companies and crucially it's split based on the waiting in the S P 500 so of my 1 000 that I've just put into the S P 500 6.

4 would be in Apple stock and so now I own 64 worth of Apple stock and that's pretty cool I now own a bit of Apple 5. 4 of that would be Microsoft so I now own 54 worth of Microsoft stock and 0. 015 of that is going to be Ralph Lauren which is for 498th on the S P 500 and so I now own 14 worth of Ralph Lauren stock now this is a very good thing and this is what Warren Buffett recommends my view for most people the best thing to do is still on the S P 500.

he says that hey if you had an extra hundred thousand dollars to invest you should just put it straight into the S P 500 or some other big Index Fund because over time your money is going to track the market you're not trying to say hey I have a crucial insight into the market and I know that apple is going to outperform all these other companies instead you're thinking you know what I'm just a normal person I don't have time to spend 80 000 hours a week trying to research the out of all this stuff I'm just gonna kind of diversify my money across all these top 500 big companies in the US I think overall U. S companies are going to go up over time and therefore I don't have to think too hard about this so what's the alternative well we talked about how you could theoretically pick stocks yourself so you could say you know what I'm going to ignore the S P 500 but chances are you are not going to beat the market chances are unless you just get really lucky you're not going to be real reliably able to get the returns that you would get by just investing in all 500 of these companies now there have been a bunch of studies and surveys and Warren Buffett even did a challenge experiment thing about this that basically show that very few funds overall actually outperformed the S P 500 and if you've got a fund that beats the S P 500 I. E it does better in that year than the S P 500 did it's unlikely to do the same the following year and so a lot of these phones are trying to quote beat the market but as Warren Buffett and a lot of these other people say you cannot beat the market so let's just invest in the market directly just put your money in an index fund and don't think too hard about it every single person I know who has invested by picking stocks has lost money and every single person I know who has invested by just investing in an index fund has made money over time the next question that this raises is okay cool I want to invest in a stock market index fund how the hell do I do that do I just go on s p 500.

com forward slash buy and buy some index funds again it's not quite how it works you need a bit of a middleman and that's where these kind of online platforms come in now this is going to vary depending on whatever country you're in so if you want to find a stocks and shares investment platform in your country then just Google that in the UK for example there are loads the ones that I personally use are Charles Stanley direct because that's the first one I started using in 2015. I also use Vanguard Vanguard is super big and super legit you can check it out and the app that I use personally for investing in individual stocks these days is trading 212 and in fact incidentally this video is now sponsored by trading212 this is kind of fun as you can tell I'm recording on a different day anyway if you want to get started with investing training212 genuinely is the app that I use it's the best way to get started you can trade stocks and shares you can also open an Isa an individual savings account if you're in the UK one of the cool things about trading 212 is you can practice investing with practice money so everything about the markets is identical it's just that you're investing fake money rather than real money and if you're uncomfortable investing real money for now this is a great way to become more familiar with the concept of investing and then once you're ready to invest with real money you can just switch using a simple button on the app and you can deposit money through Apple pay up to two thousand pounds and then you can use bank transfer subsequently and the other cool thing about trading 212 is they've got this really cool pies feature where basically you can look on the app and you can see other investment pies that other people have created so you'll have these like Finance Pros that are creating their custom pies and you'll see that they've allocated 10 to the s p or 20 to the ftse 100 or this percenter apple or Tesla or Microsoft or whatever and then you can see the performance of that specific pie over time and then what you can do if you really want to is you can copy and paste someone's pie that they have built into your own investing account and now you can automatically with a single click invest let's say 100 pounds into that pie and so that 100 pounds will then be split amongst the various allocations that the person has decided to do in the pie and that's great like obviously I'd still recommend investing in some broad stock market index fund like the S P 500 even though I don't give Financial advice anyway if you fancy giving a go it's commission free it's completely free to sign up you don't have to pay anything you can go to trading212 it's available on the App Store on iOS and on Android and if you use the coupon code Ali Ali when you sign up that will give you a free share up to the value of 100 pounds so you can get completely free money by just signing up for trading 212. check it out with a link in the video description or search trading212 on any of the app stores but thank you so much trading 212 for sponsoring this video part three common fears concerns and questions about investing so if you're broadly very unlikely to lose money because Vanguard collapsed overnight but you might lose money if the value of your Investments goes down and this is where people get really really worried because they always think ah you know if I invested my pardoned cash into these stocks and shares what if it goes to zero what if I lose my money now this is a common fear and certainly let's say you invested a thousand dollars into the S P 500 just before the financial crash in 2008 and then the markets crashed by I don't know 60 or whatever it was and so now your thousand dollars is worth like 400 I know you're thinking oh my God like I can't believe I've lost 60 of my money now if at that point you sell now you have realized the loss now you've literally lost money because you bought the thing for a thousand and you sold it for 400.

but if you just held on then the market recovered over time and by 2012 it was at the same levels and then it was just going up and up and up so even if you had invested lots of money just before the 2008 financial crisis if you had just stuck to your guns and left that money in there you'd be have you'd have doubled or tripled or something your money by now because overall the stock market broadly goes up over a long enough time Horizon it's the same with house prices you can buy a house and if you try and sell it next week then maybe the price will have gone down but if you try and sell it 20 years from now chances are unless your country has been destroyed the price will have gone up and the longer you can leave your money in these index funds or whatever the more it compounds over time and as Einstein is famously put reported to have said compound interest is the eighth wonder of the world what are the chances that all 500 of the biggest companies in the US suddenly are going to drop to zero value overnight basically zero percent I think if all 500 of the biggest companies in the US all have their value dropped to zero I'm we're going to have bigger problems in the world than the value of my stock market portfolio and the reason why I think it's reasonable to make the bet that over time the stock market goes up is because every day thousands of people are going to work in each of these companies every single day value is being created by the employees at Apple they're researching new technology they're building new stuff they're adding an extra camera or an extra lens to the iPhone and all of that means that because these people are putting in the input of human labor you would expect the value of the company to rise with time because they're making more and more cool stuff and because people are going to want to continue to buy that more and more of that cool stuff now another question people sometimes have is how much money do I need to get started do I need to be like super rich to start investing and the answer is no again it depends on which platform you're using but for example I'm trading 212 or Vanguard and Vanguard I think you just need 100 pounds to invest trading 212 I think you can start with like 5 again this is just massively varies depending on your country so do some research and figure out what are the most reputable and legit Platforms in your country and then you can invest based on that now there's two other categories of stuff that I invest in I invest in real estate so I've got a few properties in the portfolio we're not going to talk about that because I've done a video about that over there buying versus renting and that's usually outside the range for most people until you've already made a lot of money to be able to afford a deposit on a house and get a mortgage and I also invest some amount of money in crypto yep and as we can see here the total value of my crypto portfolio is 200 000 but I have actually lost 65 000 so I've put in 265k into crypto and currently it's worth 200k what can you do I'm hoping the price Rises with time so generally when it comes to recommending investing in crypto people often ask about this I would say if you want to take the gamble fine but make sure the only money you're putting into your crypto account is money that you can 100 afford to lose don't try and think of investing in general or crypto in particular as a get rich quick scheme but generally if you want to invest your money in stocks and shares as Warren Buffett says and as I do and as I generally recommend even though I'm not a financial advisor not Financial advice Etc it's pretty reasonable to put that money in a stock market index fund like the S P 500 for example by the way if you're enjoying this video so far I'd love to hear in the comments what's been your biggest concern about getting started with investing what is the thing that's holding you back part 4 fast lane investing the alternative approach to Building Wealth so so far we've talked about what some people would somewhat disparagingly called the call the slow lane approach to Building Wealth it's like the slow lane and this and there's the fast lane now this is terminology from MJ DeMarco's book of the millionaire fast language it's actually a really good book but the basic idea of slow lane investing is that hey I've got some money I'm gonna do my day job I'm Gonna Save up 10 of my paycheck and every month I'm gonna put 10 into my savings account and then I'm going to invest that money in the S P 500 and then 50 years from now by the time I'm 65 that money will have compounded and then I'll Be A Millionaire this is a very very slow form of investing it's a very slow way to build wealth and certainly it's fine to invest in stock market index funds I do that as well but there is another approach to investing and it's worth talking about that here because when we hear investing a lot of us just default to thinking oh I guess I should buy stocks and shares or I guess I need to buy a house but if we really think about it what is the point of investing money the point of investing money is for your existing money to make more money further down the line that's all the point is the point is not to invest in stocks and shares stocks and shares are a vehicle by which you can turn your money into more money further down the line but when it comes to Fast Lane investing fast lane investing is basically that instead of investing in someone else's business I.