00:00:00Okay, so let's say you wanna get started
00:00:01with this investing thing.
00:00:02You might have a bit of money saved.
00:00:04It's probably not enough for a house,
00:00:05but you decide you should probably invest in something.
00:00:07You could invest in stocks and shares, government bonds,
00:00:09corporate bonds, real estate, foreign exchange, crypto,
00:00:12NFTs, futures, fine art, watches.
00:00:14Or maybe you've got that one friend who bought Bitcoin
00:00:16in 2013 or Nvidia in like 2015.
00:00:18And then that person got super rich and you're like,
00:00:20whoa, like man, if only I'd done that,
00:00:22I'd have been like mega rich without having to do any work.
00:00:24So there's all these dreams, there's all this confusion.
00:00:26And then on top of all of this,
00:00:27there is the very real fear that you might actually lose
00:00:29all of this money that you've worked so hard to save.
00:00:31So in light of all of this,
00:00:32this is my updated ultimate guide to investing for beginners.
00:00:35And so we're gonna split this video up into four parts,
00:00:38which are timestamped so you can skip around
00:00:39if you feel like it.
00:00:40In part one, we're gonna talk about the basics
00:00:42and the philosophy behind investing.
00:00:44Then we're gonna talk about why and how to invest your money
00:00:46and some nuances around that.
00:00:47Thirdly, we're gonna talk about common fears
00:00:49and questions and concerns like what if I lose all my money?
00:00:52And then in part four,
00:00:53we're gonna talk about fast lane investing,
00:00:54which is an alternative approach to building wealth.
00:00:57So with that said, let's dive in.
00:01:00Part one, the philosophy and the basics of investing.
00:01:03Okay, so let's start with the basics
00:01:04and let's start by asking the question,
00:01:05what's actually the point of investing in the first place?
00:01:08Now, a lot of people I speak to have the experience
00:01:09where they've managed to save up some amount of money,
00:01:12maybe it's a few thousand pounds, a few thousand dollars,
00:01:14and they're feeling pretty good about it
00:01:15because now they have a safety net
00:01:16and they're being financially responsible.
00:01:18But if you're interested in investing,
00:01:19then you probably know that if that money
00:01:21is just sitting there in your bank account,
00:01:22it's actually losing value every single day.
00:01:24And that is thanks to a wonderful thing called inflation,
00:01:27where essentially over time,
00:01:28your money loses its purchasing power.
00:01:30And so obviously $1,000 today buys you less stuff
00:01:33than $1,000 did 10 years ago or $1,000 did 20 years ago.
00:01:36The $1,000 is theoretically the same.
00:01:38It's just that everything else has gone more expensive
00:01:40and therefore you can buy less stuff
00:01:41with the same amount of money.
00:01:42Now, the whole point of investing
00:01:43is to be able to put our money somewhere
00:01:45where it makes more money.
00:01:46Firstly, to counteract the effects of inflation.
00:01:48And secondly, if we can beat inflation,
00:01:50then it means like the more you invest,
00:01:52the more money you make, the more it compounds over time.
00:01:54And then that is one of the strategies for building wealth.
00:01:56So if the point of investing is to magically grow your money,
00:01:59you might be thinking,
00:02:00okay, but like how does investing actually make you money?
00:02:02And here we're gonna introduce the term asset.
00:02:05An asset is a thing that puts money in your pocket.
00:02:07So for example, if you think about buying a house
00:02:10and then putting it on rent,
00:02:11you kind of make money in two separate ways
00:02:13from that particular equation.
00:02:14Firstly, you buy the house and then you put it on rent.
00:02:16Therefore you get rental income
00:02:17coming in from your tenants every month
00:02:19and that puts money in your pocket.
00:02:20And secondly, hopefully the value of the house
00:02:22also goes up over time.
00:02:23This is called capital appreciation.
00:02:25So let's say you win a million dollars in the lottery
00:02:27and you put all of it into buy a house in cash
00:02:29and you're able to rent out that house
00:02:30for, I don't know, $2,000 a month.
00:02:33Every year, you're making $24,000
00:02:35in rental income from the house.
00:02:36And maybe if you sell the house 10 years later,
00:02:38maybe it'll be worth 1.5 million.
00:02:40And so you've theoretically made an extra 500,000
00:02:43from the capital appreciation of the property.
00:02:45In reality, of course, you probably use a mortgage.
00:02:46In reality, there's property taxes,
00:02:47there's like inflation itself
00:02:49and all sorts of more complicated factors.
00:02:50But essentially in this context,
00:02:51you are earning money through rental income
00:02:53and through appreciation of the asset itself.
00:02:55Now houses are an interesting example
00:02:57because they're quite easy to visualize.
00:02:59Like you can imagine theoretically owning a house
00:03:01and then theoretically becoming a landlord
00:03:02and having someone pay you rent
00:03:03because you probably pay rent to someone else.
00:03:05And so most people, when they think of investing,
00:03:07they think I should get on the property ladder in some degree,
00:03:09especially if your parents were into that sort of stuff
00:03:11many decades ago.
00:03:12But for the most part, for most people,
00:03:13owning a house is actually a relatively inaccessible thing
00:03:16if you are just getting started with investing.
00:03:18And so we wanna be looking to alternative asset classes.
00:03:21Now there is a long list of assets that you could potentially
00:03:24choose to invest in.
00:03:24There's stocks, shares and equities,
00:03:26which is sort of the same thing.
00:03:27There are hedge funds, there are index funds,
00:03:29there are government bonds, there are corporate bonds,
00:03:31there are fancy watches, there's fine art,
00:03:33there is crypto of course.
00:03:35And a lot of this stuff can get very complicated very quickly.
00:03:37So we are gonna simplify things
00:03:38and we are gonna be focusing on stocks and shares.
00:03:40The reason we're gonna be talking about stocks and shares,
00:03:42and this is most sensible people's recommendation
00:03:44when it comes to investing your money.
00:03:46Firstly, because it is very accessible
00:03:48to normal people like you and me.
00:03:49Secondly, you don't need a huge amount of money
00:03:51to get started, unlike buying a property.
00:03:52Thirdly, you don't need to take on huge amounts of risk,
00:03:54unlike something like crypto.
00:03:55And fourthly, you don't need to be an accredited investor
00:03:58of any kind, like for the most part,
00:03:59normal people can just buy stocks and shares.
00:04:01Part two, why and how to invest in stocks and shares.
00:04:05So what does it actually mean to buy a stock or a share?
00:04:09Well, when you're investing in stocks and shares,
00:04:10you are basically buying a small percentage ownership
00:04:13in the company that you're investing in.
00:04:14So let's say I wanted to buy shares in Apple,
00:04:16but first let's answer the question of what even is the point
00:04:19of owning, for example, Apple stock.
00:04:20And the point is that there are two ways
00:04:22to make money from stock.
00:04:23The first way you make money from investing in stocks
00:04:25is that the value of the company increases over time
00:04:28and therefore the value of your stocks or shares
00:04:30increases over time.
00:04:31Secondly, certain companies pay what they call dividends.
00:04:34For example, in the UK, there is a company called BT,
00:04:36British Telecom that pays dividends.
00:04:37And so if you own a piece of BT,
00:04:39even if it's just like a tiny percentage,
00:04:41you're not just hoping that the price increases over time.
00:04:43They are also literally paying out some of their profits
00:04:45to their shareholders.
00:04:46So we've established that there are two ways to make money
00:04:48from stocks and shares.
00:04:49The next question we have to get to is how do you choose
00:04:52which companies you want to invest in?
00:04:54Maybe you have an iPhone and you're like,
00:04:55Apple seems pretty good.
00:04:56Maybe you're like, AI stuff seems interesting.
00:04:58I should invest in Nvidia.
00:05:00Maybe you're an Elon fan boy and you're like,
00:05:01man, I should invest in Tesla.
00:05:03Maybe you watch loads of Netflix and you're like,
00:05:04man, I should invest in Netflix.
00:05:05Now here are the advice from most sensible people
00:05:07who give advice about this stuff.
00:05:08Not me, I'm not a financial advisor,
00:05:09but sensible people who are basically say,
00:05:11you should not try and pick stocks.
00:05:13This is a wonderful book by a chap called JL Collins.
00:05:15This was, is like how I got started with investing
00:05:17like 10 plus years ago.
00:05:18He says, you should not try and stock pick.
00:05:20Warren Buffett himself says,
00:05:21you should not try and actively pick stocks.
00:05:23In general, there is a better and safer approach
00:05:25to investing and that is to buy an index fund.
00:05:28So what is an index fund?
00:05:29Well, index fund can be divided into two words,
00:05:31index and fund.
00:05:32So a fund is basically just like a group of stocks and shares.
00:05:35And then the index component means that the fund tracks
00:05:38a particular stock market index.
00:05:39So for example, in the US,
00:05:41there is a very famous stock market index
00:05:42called the S&P 500,
00:05:44which is basically the top 500 biggest companies in the US.
00:05:46For example, at the time that I'm recording this video,
00:05:48Nvidia makes up 7.18% of the S&P 500.
00:05:52Apple makes up six and a bit percent.
00:05:53Microsoft makes up four and a bit percent.
00:05:55Other companies that you have heard of are Amazon,
00:05:57Alphabet, which is the parent company of Google.
00:05:59Meta, which is the parent company of Facebook and Instagram.
00:06:01And interestingly, company number 498 out of 500
00:06:04is Match Group,
00:06:04which is the company that owns the dating apps,
00:06:06Tinder and Hinge,
00:06:07which also makes up around 0.01% of the index.
00:06:10Now the point of the S&P 500 index
00:06:12is that it gives you a single number
00:06:13that you can track over time
00:06:15to see how valuable as a whole the US stock market is.
00:06:18And the vast majority of the value in the US stock market
00:06:21is in these 500 companies.
00:06:22Now, if you look at a graph of the S&P 500 over time,
00:06:24you will see that for the most part,
00:06:26it goes up and to the right,
00:06:27which is what we'd like to see,
00:06:28but you'll see these moments of decline.
00:06:29And this is where you are in a recession
00:06:31or you've got like the 2008 financial crisis,
00:06:33or you've got COVID that's just hitting,
00:06:34or you've got like tariffs.
00:06:35So the market as a whole,
00:06:37i.e. the sum of the value of all the different companies
00:06:40goes up over time,
00:06:41but sometimes goes down
00:06:42and then generally kind of continues going back up slowly.
00:06:44So that is what the S&P 500 index is.
00:06:46Now, if you invest in an index fund,
00:06:48what basically happens
00:06:49is that the money you put into the fund
00:06:50gets distributed amongst the companies in the index.
00:06:53And crucially, this is split
00:06:55based on their weighting in the index.
00:06:56So for example,
00:06:57if I invested a thousand dollars into the S&P 500 today,
00:07:01in reality, what's happening behind the scenes
00:07:02is I've got $71 and 80 cents of Nvidia.
00:07:05I've invested $65 in Apple.
00:07:07I've invested about $47 in Microsoft
00:07:09and so on across these 500 companies.
00:07:11And this is exactly what people like Warren Buffett recommend
00:07:14in terms of how to get started with investing.
00:07:15- I think it's the same thing that makes most sense
00:07:18practically all of the time.
00:07:20And that is to consistently buy an S&P 500
00:07:25low cost index fund,
00:07:27keep buying it through thick and thin
00:07:29and especially through thin.
00:07:30- Now, the great thing here is that over time,
00:07:31your money is gonna track the market.
00:07:33So the money you invest grows at the same rate
00:07:35as the stock market as a whole,
00:07:37if you invest in the S&P 500,
00:07:38which is the US stock market as a whole.
00:07:40You're not trying to come up with like some crucial,
00:07:42like game-changing insight that like,
00:07:45you aren't trying to predict 10 years ago
00:07:46that Nvidia was suddenly gonna do well or anything like that.
00:07:48You're not trying to do all of this research
00:07:50into all these companies to figure out
00:07:51which companies are like mispriced
00:07:53and like what their price to earnings ratio is
00:07:55and any of this sort of stuff.
00:07:55You're just saying, you know what?
00:07:56I'm gonna make a bet that as a whole,
00:07:58the US stock market in this case is gonna go up over time.
00:08:01And so I'm just gonna distribute my money
00:08:04across the top 500 companies.
00:08:05I'm not gonna think about it too hard.
00:08:07I'm just gonna set it and forget it.
00:08:08And I'm gonna do better things with my time
00:08:09rather than comb through spreadsheets
00:08:11and try and research companies.
00:08:12And if we take a historical average over the last,
00:08:14like, I don't know, a hundred years or something,
00:08:16the S&P 500 grows roughly by somewhere
00:08:18between seven and 9% on average every year.
00:08:21Now at this point, whenever someone hears the advice
00:08:23of index funds for the first time
00:08:24and what I was thinking when I first read this,
00:08:26I was like, okay, but like why would I invest
00:08:29in like fricking Campbell's soup company?
00:08:31Why would I invest in like Ralph Lauren?
00:08:33Like these companies clearly aren't gonna be big.
00:08:35Obviously I should just invest in tech companies
00:08:37or obviously I should invest in Nvidia
00:08:39or I should invest in Apple or I should invest in Tesla
00:08:41or obviously I should invest in products that I actually use.
00:08:43Like surely I have enough insight
00:08:45that I can pick winning stocks
00:08:47that like outperform the market.
00:08:48Now this makes a lot of sense
00:08:49'cause you might be thinking that seven to 9%,
00:08:51like that's nothing, like that's not that interesting.
00:08:53I wanna double my money.
00:08:55I wanna, you know, triple my money.
00:08:56And in general, when it comes to the world of investing,
00:08:58you should not expect to double or triple your money
00:09:01because that tends not to happen
00:09:03unless in, except in very few circumstances,
00:09:04which we're gonna talk about at the end of this video.
00:09:06Having a seven to 9% return rate
00:09:07is actually considered really solid.
00:09:09The best private equity firms in the world,
00:09:11I think aim for like 20% returns,
00:09:13but normal people like you and me
00:09:14generally can't access private equity anyway.
00:09:16And so most of us normal people
00:09:18are content with seven to 9% annual compounding returns.
00:09:21Now I wanna talk a little bit more
00:09:22about why you should generally not try
00:09:24and pick individual stocks.
00:09:25And the whole idea here is that unless you get really lucky,
00:09:27chances are you are not actually gonna beat the market.
00:09:30There have been a bunch of studies and surveys
00:09:31where people have tried this over time.
00:09:33Warren Buffett even did a challenge
00:09:34where he challenged like fund pickers
00:09:35who were like literally specialists at picking stocks
00:09:38and basically compared the performance
00:09:39of these like professionals whose entire job it is
00:09:41to pick stocks against the S&P 500
00:09:43and basically found that the S&P 500
00:09:45actually outperforms most funds most years,
00:09:48if you take a long enough time horizon.
00:09:49There is also a hidden cost of stock picking
00:09:51because even if you could theoretically beat the market,
00:09:53the way you do that is by investing loads and loads
00:09:55and loads and loads of time in actually doing the research
00:09:57to be able to know what you're talking about.
00:09:58So like spending hours every week, reading financial reports
00:10:01and tracking the news and analyzing charts
00:10:03and worrying about whether you should be buying or selling
00:10:05at each individual moment.
00:10:06Now that is time that you probably have better things
00:10:08to do with, you could probably spend it with your family
00:10:09or your hobbies or building a business.
00:10:11If you invest in an index fund,
00:10:12it basically takes like 30 minutes or less to get started
00:10:14and then you don't have to put any time into it
00:10:16thinking about it or worrying about it
00:10:17whereas stock picking is quite different.
00:10:19For me personally, I have a bunch of friends
00:10:20who have invested in individual stocks over time
00:10:22rather than an index fund.
00:10:24Basically all of them have made less money
00:10:26than they would have done
00:10:27if they just invested in the index fund in the first place.
00:10:29And some of them have even lost money overall
00:10:31because they were so convinced
00:10:32that company X was gonna do really well
00:10:33and then company X didn't do well
00:10:35and they put too much money in company X.
00:10:37So that's like a scenario in which
00:10:38you can actually lose money
00:10:39but you're very unlikely to lose money
00:10:41if you just spread it out
00:10:42amongst the top 500 companies in the US
00:10:44or amongst the top 1,000 companies in the world.
00:10:46Now I do wanna hammer home this point
00:10:47because at this point, if you're still with us in the video,
00:10:50you might be thinking, but like surely stock picking is easy.
00:10:52I mean, man, five years ago, I knew that Apple would do well
00:10:56and if I just invested in Apple five years ago,
00:10:58I'd be rich right now.
00:10:59Or like, man, you know, 10 years ago,
00:11:01I had a good inkling that Nvidia was gonna get big.
00:11:04You know, I just didn't get round to putting money in it
00:11:05but had, man, had I put money into Nvidia,
00:11:08it would have gone to the moon.
00:11:09And so what people do is that they get this sort of
00:11:11false sense of like thinking of themselves
00:11:13as being very good investors because at one point,
00:11:14maybe in 2013, you considered buying Bitcoin
00:11:17just like I did and never actually did it.
00:11:18Or like, I don't know, when Disney+ was announced in,
00:11:20I don't know, five years ago, I was like, huh,
00:11:22maybe I should invest in Disney stock and I never did.
00:11:24And I'm like, oh man, Disney stock is so up.
00:11:25Man, if only I'd invested in Disney stock,
00:11:27I'd have been, I'd have made so much money,
00:11:29et cetera, et cetera.
00:11:30The thing to keep in mind is that
00:11:31unless you actually invested in Bitcoin in 2013,
00:11:33you can't say that like, man, I'm such a good investor.
00:11:36I knew Bitcoin was gonna do well because like,
00:11:38everyone's like, I knew it was gonna do well.
00:11:39And unless you put your money where your mouth is,
00:11:41it really doesn't count.
00:11:42Secondly, if you did invest in Bitcoin in 2013
00:11:44or Nvidia in 2013, when would you have sold?
00:11:47Would you have sold when the price 5Xs or 10Xs or 100Xs?
00:11:50Like, how would you have known
00:11:51to hold on for the next like 15 years
00:11:53because like stuff was gonna go up and down
00:11:55and ultimately up.
00:11:56Let's say you own Nvidia stock right now.
00:11:57Nvidia is at an all time high in its stock price.
00:11:59Do you keep on holding or do you sell?
00:12:01Do you think, man, this AI boom is a bubble.
00:12:03So do you sell Nvidia because you're like,
00:12:05there's open AI and all these Microsoft
00:12:07and all these companies.
00:12:08It's all just like a bubble and it's gonna pop.
00:12:09Why didn't you sell six months ago
00:12:10when everyone was like, oh my God, Nvidia is dying.
00:12:12Stock price is going down.
00:12:13Like loads of people sold at that point.
00:12:15Like what is it about you
00:12:16that would have kept you holding onto the stock?
00:12:17It is so easy to delude ourselves
00:12:19into thinking that we are good investors
00:12:21just because we had a thought a few years ago
00:12:23that like I should probably buy Nvidia
00:12:24and then didn't actually do it.
00:12:25Or even if you did buy Nvidia a few years ago,
00:12:28you maybe just got lucky.
00:12:29And it has nothing to do with like your quality
00:12:31as investor 'cause there are literally
00:12:32full-time professionals whose job it is to pick stocks.
00:12:35They do it for 60 to 80 hours a week.
00:12:37And in general, over time, index funds outperform
00:12:40even those people who are putting their entire life's work
00:12:42into trying to pick stocks.
00:12:43Generally, the younger you are, the more prone you are
00:12:46to wanting to do individual stock picking
00:12:48because your memory is just not long enough.
00:12:50For example, if you happen to be one of the, I don't know,
00:12:5120% of people who watch this channel
00:12:53who are over the age of 40,
00:12:54you probably remember Kodak in the 1990s.
00:12:57They were absolutely huge.
00:12:58No one could have imagined a world without Kodak
00:13:01because they were absolutely massive.
00:13:01Like they actually invented digital cameras back in 1975,
00:13:04but they didn't wanna market the digital camera
00:13:06because it would cannibalize
00:13:06their like film camera business.
00:13:08And now no one uses a Kodak anymore.
00:13:09It's kind of like retro nostalgic tech
00:13:12because they filed for bankruptcy in like 2012.
00:13:13Or if you have the memory of like 20 years ago,
00:13:15Blockbuster was like absolutely massive.
00:13:17People would go to a Blockbuster store on a Friday night
00:13:19and like rent a movie.
00:13:20Netflix literally went to Blockbuster and said,
00:13:22"Hey, do you wanna buy us for $50 million?"
00:13:24And Blockbuster's CEO laughed in their face.
00:13:25And now there is one Blockbuster left on the planet
00:13:27and Netflix is worth hundreds of billions of dollars.
00:13:29If you speak to your parents or your grandparents,
00:13:31there is no way they would have ever imagined
00:13:33that Lehman Brothers, the 158 year old investment bank
00:13:37would never not be around
00:13:38'cause it was just too big to fail.
00:13:40It survived the civil war.
00:13:41It survived two world wars.
00:13:42It survived the great depression in the US.
00:13:43But then in September, 2008,
00:13:45it just collapses in a single weekend.
00:13:46And people who've worked there for decades,
00:13:48who have their entire retirement savings in the bank,
00:13:50who have their entire like stock portfolio
00:13:52in like the Lehman stock,
00:13:53those people lost everything overnight.
00:13:54Now the point is the more life experience you have,
00:13:56the more you know that these are things, right?
00:13:58Like every single generation has examples of companies
00:14:01that were too big to fail.
00:14:03Right now, I cannot imagine a world without Apple
00:14:05or without Tesla or without Netflix,
00:14:07but neither could the chaps in 2008.
00:14:08They could not imagine a world without Lehman Brothers.
00:14:10The point isn't that you don't wanna invest
00:14:12in Netflix and Apple and Nvidia.
00:14:13The point is you don't wanna only invest
00:14:15in Netflix and Apple and Nvidia.
00:14:16You wanna try and diversify your holdings
00:14:18across multiple different companies,
00:14:19rather than betting your entire financial future
00:14:22on a single company.
00:14:22Okay, so at this point, if you are sold on index funds,
00:14:25then you might be asking the practical question of like,
00:14:26how do I actually buy them?
00:14:28Unfortunately, you cannot just go
00:14:29to smp500indexfund.com/buy.
00:14:32You have to go through a middleman
00:14:33and that middleman is generally referred to
00:14:34as a stock broker.
00:14:35Back in the day, it was a real life person
00:14:37that you would phone up to buy and sell stocks
00:14:39on your behalf on the New York Stock Exchange
00:14:41or the London Stock Exchange or whatever.
00:14:42Nowadays, it's not a real person.
00:14:44It's just online platforms.
00:14:45There are loads of them depending on which country you're in.
00:14:47So you just Google like stock platform
00:14:48and then insert your country name.
00:14:49Like Vanguard is one of the big global ones
00:14:51that's available in lots of different countries.
00:14:53They're also available in the UK.
00:14:54So I have a lot of my holdings in Vanguard.
00:14:55Trading 212 is another app
00:14:57that me and my wife have been using for years.
00:14:58So I mostly have my holdings split across Vanguard
00:15:01and Trading 212.
00:15:02Speaking of, we should reach out to Trading 212
00:15:03to sponsor this video.
00:15:04So if that deal goes through,
00:15:06you will hear a sponsored message now.
00:15:07All right, so I'm gonna tell you about Trading 212
00:15:09who are very kindly sponsoring this video.
00:15:10Trading 212 is a fantastic online investment platform.
00:15:13Me and my wife Izzy were both using it independently
00:15:16and have been for years,
00:15:17even way before they started sponsoring the channel.
00:15:18The platform makes investing super easy,
00:15:20super straightforward.
00:15:21There are no commissions.
00:15:22You can sign up with as little as like 10 pounds.
00:15:24You can sign up to fractional shares
00:15:26and there's none of that unnecessary friction
00:15:28that stops people from ever getting started.
00:15:29If you're really scared of investing,
00:15:31they even let you get started trading with practice money.
00:15:34So it's not real money,
00:15:35but you're using practice money on the real market.
00:15:37So you can see if you had invested 100 pounds or 1,000 pounds
00:15:40or whatever the thing is,
00:15:41what would you have made or what would you have lost
00:15:43if you're super, super scared about it?
00:15:44And so it's a really nice like entrance point
00:15:46for people who are new to investing.
00:15:47The fractional shares bit is really useful.
00:15:49It means you can invest in expensive stock
00:15:50like Apple and Google and stuff
00:15:52without needing to buy a whole share.
00:15:53You can buy a fraction of a share
00:15:55and their pies and auto invest features are also really good.
00:15:57So the pies feature is essentially,
00:15:58you can basically just like browse other people's
00:16:00like asset allocation portfolios
00:16:02and you can copy and paste their asset allocation
00:16:04into your own portfolio if you want.
00:16:06And the auto invest feature is also really good
00:16:07because then you can put your investing on autopilot
00:16:10like every month it can deposit a certain amount
00:16:12into whatever stocks or funds or whatever you want.
00:16:14And they handle everything else,
00:16:15including dividend reinvesting and asset rebalancing.
00:16:18And these are the sorts of services that used to in the past
00:16:20be only available to high net worth individuals.
00:16:22As a bonus, if you sign up to Trading 212 using my link,
00:16:25you will get a totally free fractional share
00:16:27worth up to a hundred pounds.
00:16:28So it's free money, you might as well.
00:16:29There'll be a link down below,
00:16:30or you can go to trading212.com/join/ali
00:16:33to get your free fractional share.
00:16:34So thank you Trading 212 for sponsoring this video
00:16:36and let's get back to it.
00:16:37Oh, that worked well.
00:16:38It's pretty good.
00:16:39Seamless integration, fingers crossed.
00:16:41But anyway, even with all this information,
00:16:42there are probably some fears and concerns
00:16:44in the back of your mind.
00:16:45So let's talk about those.
00:16:46Part three, common fears and concerns and questions.
00:16:50Fear number one, what if I lose all my money by investing?
00:16:53This is the big one.
00:16:54This is the thing that stops most people
00:16:55from ever getting started with investing because like,
00:16:58oh my God, what if I lose all my money?
00:16:59What if something like 2008 happens
00:17:01and like you had all your money in Lehman Brothers
00:17:02and then it collapses and then suddenly you're bankrupt?
00:17:04Oh my God, that would be terrible.
00:17:05Now this actually is a totally legitimate concern.
00:17:07I was worried about this until 2015
00:17:10when I read "The Simple Path to Wealth" by J.L. Collins
00:17:12for the first time and realized
00:17:13that I didn't need to worry about it too much.
00:17:14So let's put some numbers on this.
00:17:15The biggest crash in recent memory
00:17:16was the crash of March, 2020 when COVID was happening.
00:17:20You're probably old enough to remember that.
00:17:21Now let's say you'd invested a thousand dollars
00:17:23into the S&P 500 at exactly the wrong time
00:17:26just before the crash, so like early 2020.
00:17:28And then COVID hits.
00:17:29And then in a single month in March, 2020,
00:17:31the market, the S&P 500 drops by 34%.
00:17:34So your thousand dollars is now worth $660.
00:17:37You have lost $340.
00:17:39Oh my goodness.
00:17:40At this point you're thinking, oh my God,
00:17:42I knew I shouldn't have done this investing thing.
00:17:43I'm losing so much money.
00:17:45My money, oh my God, I've lost this $300.
00:17:47The world is literally shutting down.
00:17:48Oh my God.
00:17:49But if at that point you decide, screw it,
00:17:52I'm just gonna sell.
00:17:53I don't wanna lose any more money.
00:17:54Then you have realized the loss
00:17:56because you bought the index at a thousand dollars.
00:17:57You sold it at 660.
00:17:59So you have literally bought high and sold low,
00:18:01which is the opposite of what you should do.
00:18:03And so you've lost $340.
00:18:04But if you had just held on,
00:18:06if you'd been like, you know what, I'm just gonna hold on.
00:18:08You know, I knew that investing in stocks and shares
00:18:10was like a little bit risky,
00:18:11but it gets a lot less risky if you just like hang on
00:18:13and just leave your money in there for a long time.
00:18:15The market literally recovered
00:18:16to its pre-crash levels by August.
00:18:18So it took five months to recover
00:18:20back to where it was before.
00:18:22So within five months, you'd have been back up to a thousand
00:18:24dollars and then it just kept going up and up.
00:18:26And by the end of 2021,
00:18:27your thousand dollars would have been worth $1,400.
00:18:29And by the end of 2025, that same $1,000,
00:18:32if you just held on through the crash
00:18:34would have been worth over $2,100.
00:18:36So in that five-year period
00:18:38where we all lived through a pandemic,
00:18:39you would have more than doubled your money
00:18:40if you had just held on,
00:18:42assuming you had invested at the worst possible time.
00:18:44Now, yes, back in 2008,
00:18:45it took like a few years for the market to recover,
00:18:47but recover it did.
00:18:48And even if you'd invested in the stock market
00:18:50at the absolute worst possible time,
00:18:52just before the 2008 financial crisis,
00:18:53you would have still made way more money in the long run
00:18:56if you just held on.
00:18:57And the key insight here that I learned from this book
00:18:58and a bunch of research since is that for the most part,
00:19:01the stock market goes up over time,
00:19:03as long as you have a long enough time horizon.
00:19:05It's sort of the same with house prices.
00:19:07Like for the most part, in most countries,
00:19:09in most cities where people actually want to live,
00:19:10if you buy a house today and try and sell it next week,
00:19:13maybe the price has gone down.
00:19:14If you try and sell it next month,
00:19:15maybe the price has gone down.
00:19:16But if you try and sell it 20 years from now,
00:19:18chances are the price will have gone up quite significantly.
00:19:20So basically the longer you can leave your money
00:19:22in the index funds without touching it,
00:19:24the more it compounds over time.
00:19:25And apparently Albert Einstein had that quote of like,
00:19:27"Compound interest is the eighth wonder of the world."
00:19:29Okay, but like seriously,
00:19:30this is my hard-earned cash I'm investing here.
00:19:33Like what would have to be true for me to lose all my money?
00:19:35So if you're investing in the S&P 500,
00:19:37in order for you to lose all of your money,
00:19:39the value of top 500 companies in the US
00:19:42suddenly has to drop to zero overnight.
00:19:44What are the chances of that?
00:19:44Like if all of the top 500 companies in the US
00:19:47suddenly had their entire value disappear overnight,
00:19:50we would probably be living through an apocalypse.
00:19:52We'd probably have way worse problems
00:19:54than the value of your stock market portfolio.
00:19:56And the money that you invested in those stocks
00:19:58probably wouldn't even be worth the paper it's printed on
00:20:00because like civilization has collapsed
00:20:02or something like that.
00:20:03Now, I think it's a very reasonable bet personally
00:20:05that the stock market is gonna go up over time
00:20:07over a long enough time horizon.
00:20:09And there's a few different reasons for that.
00:20:10So firstly, human productivity is a thing
00:20:12and human productivity compounds.
00:20:14So if we imagine a company like Nvidia, Apple, Amazon, Meta,
00:20:17like these companies that make up
00:20:19the top few companies of the S&P 500,
00:20:21every day there are thousands and thousands of people
00:20:23that go to work where their job is to literally add value
00:20:26to the company, right?
00:20:27Like they make stuff, they invent things,
00:20:28they create a new iPhone, they make a new chip.
00:20:30All of that stuff creates real value.
00:20:32Like one thing that I didn't quite appreciate
00:20:34before I started getting into investing
00:20:36is that the value of a company is not just people gambling
00:20:40on like, I reckon Elon's gonna be great,
00:20:42therefore Tesla price should go up.
00:20:44I mean, in that context, it kind of is,
00:20:47but like the value of a company is a real thing.
00:20:49And in general, the more revenue the company has,
00:20:51the more profit the company has,
00:20:52the more products the company has,
00:20:53the greater that value is.
00:20:54And so because people are continually doing work,
00:20:57you would expect the value of companies
00:20:59where people are continually doing work to go up over time
00:21:01because value is literally being created every day.
00:21:03The second reason is that the world keeps on getting bigger.
00:21:05So like 20 years ago,
00:21:06we had like 6 billion people in the world.
00:21:07Now we have like 8 billion people in the world.
00:21:09More people means more customers and more transactions
00:21:11and more economic activity.
00:21:12There's hundreds of millions of people in Asia and Africa
00:21:14and South America who are like buying stuff
00:21:16like entering the consumer economy for the first time.
00:21:18More and more people are getting access
00:21:20to the internet every single day.
00:21:21These people are buying iPhones,
00:21:22they're opening bank accounts,
00:21:23they're like subscribing to online software.
00:21:25So the fact that like in general,
00:21:27the world's population is increasing is another reason
00:21:29as to why you would expect the value of companies to go up
00:21:31'cause there are more consumers who want the stuff
00:21:33that the companies make.
00:21:34Thirdly, I think it is a reasonably strong bet
00:21:36that the value of something like the S&P 500 Index Fund
00:21:39will go up over time is because it is a self-healing index.
00:21:42So it's not like a list of 500 companies that never changes.
00:21:44It's a curated list of 500 companies.
00:21:47So if a company starts failing,
00:21:48it gets kicked out of the index
00:21:50and it gets replaced with a new company.
00:21:51Something like Blockbuster disappears
00:21:53and something like Netflix takes its spot.
00:21:54So you can kind of think of the index
00:21:55as a sort of like best of Spotify playlist
00:21:58that's like constantly being updated
00:21:59with whatever is most valuable at that given moment.
00:22:02And so you're not betting
00:22:03that any single company will survive forever.
00:22:05You're not even betting
00:22:06that like these top 500 companies will survive forever.
00:22:08You're just betting that the top 500 companies in the US,
00:22:11in this example, at any given time will collectively grow
00:22:14because people are going to work
00:22:16and creating value within these companies.
00:22:17At this point, you might be thinking,
00:22:18but like the S&P 500 is just American companies.
00:22:21And you know, America is gonna collapse
00:22:23because of Trump or because of Elon
00:22:25or because of the woke people or because of the immigrants
00:22:28or because of insert whatever flavor you would want in that.
00:22:32It's like, you know, and to that, I would say,
00:22:34yeah, that's actually a fair point.
00:22:35That is why you don't have to invest
00:22:37in the S&P 500 Index Fund.
00:22:38There are things called Global Index Funds.
00:22:40So there's the Vanguard FTSE All World Index Fund,
00:22:43which is sort of like the S&P 500
00:22:44in that it is an index fund.
00:22:45But instead of investing
00:22:46in just the top 500 companies in the US,
00:22:48instead, this fund splits your money
00:22:50across the top 3,700 companies across 49 different countries.
00:22:55So if you put $1,000 in that,
00:22:56you're getting a little bit of Apple,
00:22:57you're getting a little bit of Microsoft,
00:22:59but you are also getting some Samsung from South Korea.
00:23:01You're getting some TSMC in Taiwan.
00:23:03You're getting a little bit of Toyota in Japan.
00:23:04You're getting a little bit of LVMH in France.
00:23:06So even if, for whatever reason,
00:23:08you believe that the US economy is heading for decline,
00:23:10the global economy probably isn't.
00:23:12And so you can just spread your money
00:23:14when you're investing across like global companies
00:23:16rather than just US companies.
00:23:18And the nice thing about the Vanguard All World Index
00:23:20is that it automatically adjusts its weightings
00:23:22based on where the value is.
00:23:23So if the US suddenly shrinks
00:23:25and let's say India's economy suddenly booms,
00:23:27then your distribution of investments will naturally shift
00:23:29to wherever the growth is happening.
00:23:30So again, you're not gambling that like a particular company
00:23:33or a particular country is gonna win.
00:23:35What you're basically saying is,
00:23:36I reckon humans across the world
00:23:38who are working in companies
00:23:39will be creating more value over time
00:23:41and there will be continued demand for that value.
00:23:43Therefore, the price of everything
00:23:44is gonna go up over time.
00:23:45So with all that said, you might be asking the question
00:23:47of like, okay, cool, I'm sold.
00:23:48How do I get started?
00:23:49How much money do I need to get started?
00:23:51The answer to this question depends on the platform.
00:23:53Most sensible platforms in most countries,
00:23:55you can get started with like a dollar
00:23:57or like $10 or like a hundred dollars,
00:23:58like generally a small amount of money.
00:23:59Again, I would do some Googling or ask Chad GPT or Claude
00:24:02to figure out like what the best free platform is
00:24:05depending on what country you're in.
00:24:06You should be able to find a platform
00:24:07that is completely free.
00:24:08You shouldn't have to pay for it
00:24:09unless you're in a country
00:24:10that has weird regulations and stuff.
00:24:11But for the most part, you can do this for free
00:24:13with very little money to get started.
00:24:14Oh, by the way, if you're enjoying this video so far,
00:24:16I would love to hear from you in the comments.
00:24:17What has been your biggest concern
00:24:19about getting started with investing?
00:24:20And if you haven't yet, like what's the thing
00:24:22that's holding you back?
00:24:23Okay, so at this point,
00:24:23we've covered the traditional approach to investing.
00:24:25But there is a final thing we need to talk about
00:24:27because yes, of course we all wanna be rich in 30 to 40 years
00:24:30but it would be nice if we could get rich
00:24:32in five to 10 years, 15 years,
00:24:34rather than having to wait 30 to 40 years
00:24:36to build true wealth.
00:24:37And that is where we come to part four of the video,
00:24:39which is fast lane investing,
00:24:41the alternative approach to building wealth.
00:24:42Now, what we've talked about so far
00:24:43is what MJ DeMarco, author of "The Millionaire Fastlane"
00:24:46calls the slow lane approach to building wealth.
00:24:49He's a bit disparaging about it,
00:24:50but basically it's like, I've got some money,
00:24:52I've got a day job, I'm gonna save 10% of my income
00:24:55from my day job, I'm gonna put it into investments
00:24:57like stock market index funds
00:24:58or like real estate or whatever.
00:25:00And then 50 years from now, that money is gonna compound
00:25:02and then I'll be a millionaire and stuff.
00:25:03Now, this is a very slow form of investing.
00:25:06It's totally fine and I think it's very important to do
00:25:08as part of a diversified balanced portfolio
00:25:11and balanced life and stuff, but there is another approach.
00:25:14And that approach involves reframing
00:25:16what investing actually means.
00:25:17Now, when we hear investing, a lot of us default to thinking
00:25:20that investing means taking our money
00:25:22and buying an asset with it, like stocks and shares
00:25:25or like buying a rental property.
00:25:26But if we really think about it from first principles,
00:25:28what is the point of investing money?
00:25:29The point of investing money is for your existing money
00:25:31to make more money further down the line.
00:25:33The point isn't explicitly to invest in stocks and shares
00:25:36or like watches or like, I don't know, fine art.
00:25:38The point is to grow your money and the stocks and shares
00:25:40or the rental property or the watch.
00:25:41That's just a vehicle by which you turn your money
00:25:44into more money.
00:25:45So if we imagine something like, you know, 7% returns
00:25:47in the S&P 500, let's say you've got a spare $10,000.
00:25:50If you put the $10,000 in the S&P 500 today,
00:25:52on average, it'll be worth $10,700 next year.
00:25:56So then the question becomes, can I find a way
00:25:58to invest that $10,000 or whatever the thing might be
00:26:00so that it can make more than $700 in the next 12 months?
00:26:03And generally to that, the answer is usually a hell yes.
00:26:06So there's a couple of different options here.
00:26:08Option number one is if you invest in your own ability
00:26:11to make money.
00:26:12So let's say I have a job,
00:26:13like I'm a healthcare assistant in a hospital
00:26:15and I could spend a thousand pounds to take a new course
00:26:19that gives me a new certification.
00:26:20And that certification, like being a phlebotomist,
00:26:23allows me to increase my hourly rate.
00:26:24So if I'm making, let's say, $15 an hour
00:26:26as a healthcare assistant and this new thing
00:26:29lets me suddenly make $30 an hour as a phlebotomist.
00:26:32I've invested in my own skills and my own credentials.
00:26:34And as a result, I've literally doubled my earning capacity.
00:26:37And so with an additional four hours of work, what's that?
00:26:39An extra $60 with 40 hours of work.
00:26:42So 40 hour work week, it's $600.
00:26:43So within week two of making this trade,
00:26:45I've already like made back my investment.
00:26:47And now it's just like pure profit from there
00:26:50based on like that investment.
00:26:51And so my return on this thousand dollars
00:26:52that I've invested in this course or whatever
00:26:54is way higher than 7% because I've invested
00:26:57in my own ability to make money.
00:26:59And this is generally why investing in your own skills
00:27:01or your own education is very reasonable
00:27:03provided you can see a path from like, okay,
00:27:06getting that credential or getting that qualification
00:27:08or learning those skills, provided you can see a path
00:27:10to like a sensible return on that investment.
00:27:12I'm not saying you have to buy courses and stuff,
00:27:13but you can find stuff for free on YouTube.
00:27:15I'm just saying that there is often more value
00:27:17in investing in your own ability to make money
00:27:19than there is in investing in like 500 random companies
00:27:22in the US if you had to choose.
00:27:23And then we have option number two,
00:27:24which is to actually invest in your own business.
00:27:27And that is another form of fast lane investing.
00:27:30Now, obviously this only applies if you have a business
00:27:31or if you want to start your own business.
00:27:33If I use my own business as an example, when I was 18,
00:27:35I started a business helping kids get into med school.
00:27:37In year one, it made about 8,000 pounds, like $10,000.
00:27:41In year two, it made about 80,000.
00:27:43In year three, it made about 150,000.
00:27:45So we eight X revenue in year one
00:27:47and we two X revenue in year two.
00:27:49And I sort of stayed at 150,000 for a few years.
00:27:51And then a few years later in like 2020,
00:27:53boom, went up from 150K to like 1.2 million.
00:27:55So we did 10 X in revenue again.
00:27:57And then the next year we four X in revenue
00:27:59from 1.2 million to $4.6 million pounds.
00:28:02I can't remember the exact currency.
00:28:03If we consider the 12 year period of this,
00:28:05that's way more than 7% per year.
00:28:07Now, if you were to put money in Apple,
00:28:08it is very unlikely that Apple will 10 X its value
00:28:11in the next 12 months
00:28:12because they're already absolutely huge.
00:28:13And the bigger you are, the harder it is to grow,
00:28:16at least in terms of percentages,
00:28:17because you're already so huge, right?
00:28:18But if, for example, you took $1,000
00:28:20and you used it to start your own business,
00:28:21it is totally reasonable for you to have made 10 grand
00:28:24by next year, or even 100 grand.
00:28:25I've got this thing called Lifestyle Business Academy,
00:28:27which is like an online business mentorship thing
00:28:29for beginners starting businesses.
00:28:30We have some people who've started a business
00:28:31for the first time and within like three months,
00:28:33they made 10 grand and they're on track to make 100 grand
00:28:36within the first 12 months.
00:28:37And so if you think of the investment
00:28:39in starting their business, for example,
00:28:40and maybe investing in an educational program
00:28:42or a mentorship program or whatever,
00:28:43like they're getting a way better return
00:28:45on that particular investment
00:28:47compared to just investing in the S&P 500.
00:28:49And if you're interested in this sort of approach
00:28:51to building your own business,
00:28:52where you could take some amount of money,
00:28:54it doesn't have to be a huge amount,
00:28:55you could invest it, a small amount of it,
00:28:56like maybe even a few hundred dollars, maybe even less,
00:28:58in starting your own business.
00:29:00That business could be something like a lifestyle business
00:29:02that could quite conceivably get you to 100K in revenue
00:29:05within about 12 months.
00:29:06If you're interested in more details about that,
00:29:07I have a video over here somewhere
00:29:09that breaks down that concept in more detail.
00:29:11In general, I think it is good to invest a good chunk
00:29:13of your time, energy, and money into starting your own thing
00:29:16and improving your own ability to make money,
00:29:18and then investing the rest into something like the S&P 500,
00:29:21which is what I've been doing
00:29:21for the last like 10 plus years.
00:29:22So yeah, you should totally check out this video over here
00:29:24if you are interested
00:29:25in potentially starting your own business
00:29:27to drastically increase your rate of return.
00:29:28Thank you for watching, and I will hopefully see you there.
00:29:30Bye-bye.