This Is How To Become A Millionaire: Index Fund Investing for Beginners
Jason 0 Comments Retire Wealthy Retirement Planning
hi guys it's mark so did you know if you save two hundred dollars per month at an eight percent annual return then in 45 years you would have over wait for it one million dollars to be honest when someone first explained this was possible by investing in index funds i hardly understood a word they were saying it was like they would speak in a different language today i thought it was about time that i made the video that i wish i'd seen when i was younger and explain everything step by step and because i like people that actually practice what they preach i'm gonna be investing ten thousand dollars of my own money during this video so you can see exactly how it's done just a quick disclaimer though i'm not a financial advisor i'm a businessman and this is just some of the real life strategies that have worked for me personally i always thought of index funds as my backup plan if my businesses hadn't been successful then i would have become a millionaire anyway through these investments just remember if you like the video then smash the like button as it really helps push this video out to more people and also consider subscribing if you want to grow your wealth part one uncovering the lies so let's cut to the chase you've been put a major disadvantage people have been telling you lies about investing all of your life for instance at school when i was growing up i remember asking my teachers about investing and they always said it's just for rich people as they can afford to hire professionals to do it for them for the longest time i believed investing wasn't for me because i wasn't a pro and i didn't have much money and i thought i wouldn't stand a chance then we got friends one of mine said i'd have to look at all the financial newspapers learn how to read the charts and according to him it just wasn't worth my time and on top of this every time i mentioned investing to my family they seemed so scared because they thought it's the most risky thing in the world and not for normal people my dad even said if i started investing i'd lose all my money can you believe that these lies are exactly what the experts want you to believe as they know that index fund investing is extremely easy to do you don't need much money to start the risks are pretty low and on average it will make you more money in the long term the dark truth is that the average actively managed fund returns two percent less a year than the market in general this means that professionals on average are doing worse than index funds and even if they end up losing you money they still charge you fees no matter what now according to my favorite film the matrix you have now taken the red pill and you've woken up to the truth it's now time to move on to part two understanding the game i know when i first started investing i felt like i was going to make so many mistakes but once you understand their language it all becomes so much easier and that's what we're going to be talking about in this part so i've been banging on about index funds in many of my videos so i think it's about time i explained what they are and why they're so cool i'm a big football fan and if you have ever followed any sports you'll be familiar with a league table like this the better your team performs the higher up they'll be on the list but on the other hand if they do really badly they might be removed from the league entirely this is almost exactly the same as an index all you have to do is switch out the teams for companies let's take the s p 500 for example this is a list of the 500 best performing public companies in the usa the big dogs being amazon google apple and more recently tesla and just like a league table if a company doesn't perform well they're at risk of being removed from the list hasta la vista baby the idea of an index fund is to be a little bit sneaky as it allows you to invest in every single company on the list with just one click it's a bit like a friend of mine who picks a different football team each year he just wants to pick the winner every time so investing in index funds means that even if a few companies do terribly then it's balanced out by the companies that are doing extremely well the average return on the s p 500 over the last 10 years has been 13.6 now that is higher than usual but get this no one has ever lost any money if they've bought and held an s p 500 index fund for more than 20 years so if this is so foolproof then why do people still buy individual stocks well personally i like to do this just for a bit of fun i also think that some companies are currently working on awesome technology for the future but aren't making a lot of money at the moment so they won't make the cut into the popular index funds so now and again i like to invest some extra money into these up and coming companies so i don't miss out and that reminds me we bought currently giving away four free individual stocks if you want to pick them up i'll leave the link in the description and for everyone that's outside of the usa or china i'll leave a link where you can claim a free stock with trade in 212.
Hey that's pretty good you'll often hear people throwing around the terms roth ira in the usa stocks and shares isa in the uk tfsa in canada and supers in australia but what does it all mean well these are types of accounts that allow you to earn profits on your investments and you don't have to pay any taxes on them but they generally have limits because they're just so powerful these are kind of like captain america shield so let me explain if captain america just sat at home with his shield then he wouldn't ever get anything done but when he takes that shield into battle he has an advantage so these accounts are like your shield make sure to use them when you're investing a way you can do this is by using the money inside your shielded account to invest into index funds and all the profits will be yours because the government won't take a cut one of my biggest questions when i first started was should i invest all my money at the same time or do it gradually now this is something lots of investors argue about so i'm going to give you my view on things remember later i'm going to be investing this 10 000 in full so that kind of gives you an idea of what i believe investing all your money as a lump sum is certainly more risky however if i'm investing in something i know will increase over time like an s p 500 index fund then there is no point waiting the longer you wait the worse off on average you'll be however if you don't have the cash i wouldn't wait to save up the money i would just invest what i could every month as sometimes you're going to buy when the stocks high other times you're going to buy when the stock's low but overall this is going to balance out and this is known as dollar cost averaging when you log on to an investing website or app you'll see that there is something called etfs which are very similar to index funds and a lot of people get them confused both allow you to invest into a basket of stocks however the easy way to remember the difference is just to think of what etf stands for exchange traded fund if we break that down simply it just means that it can be traded on the stock market throughout the day whereas an index fund can only be bought and sold for a price that is set at the end of each trading day but let's cut to the chase you probably want to know which one's better on average if you're starting with little money then etfs may be a better option as they have lower minimum investment thresholds and many brokers don't charge a trading commission now if you're still watching this and you're younger than 18 then i am really impressed that you've been listening to a boomer like me for so long but seriously not many people learn this at such a young age as they don't teach it at school a way you can start investing under 18 is to open up a custodial account in the usa or a junior stocks and shares iso in the uk set up these accounts you just need to ask your parents the real secret ingredient to this millionaire formula is time and when you're younger you have so much of it that's because every year as you keep adding to your investments the interest starts to compound and grow at a rapid pace it's a snowball effect once you reach a certain tipping point the interest you're making is much more than the amount you're investing on a monthly basis it's a bit like when you see someone take ages to get to a hundred thousand subscribers on youtube and then within a few months they managed to hit the big million the sooner you get started the better as time will be on your side now i want to clear something up when people talk about index funds you will hear s p 500 again and again people just love it as i mentioned before this is a top 500 public companies in the usa but the cool thing is you don't actually have to be in the usa to invest in this i'm in the uk and it's one of my favorite investments i just love to think that i own a small part of all the biggest companies in the usa part three mastering the strategy so lots of people will teach you what to do but they won't actually say how to do it so i'm going to walk you through everything right now while i invest my own ten thousand dollars the first thing to really do is to work out your goals let's say you want to become a millionaire that was one of my goals i just had to work out how much i would actually need to invest per month to achieve this i love using these compound interest calculators you can find them online easily yourself if you want to have a go at this so if you're able to invest 250 dollars per month with an 8 annual return over 42 years you'll have over a million dollars in your account now if you're able to invest that for another 10 years you'll have over 2 million in your account of course if you wanted to invest even more then you're just going to speed up the whole process the next thing we need to do is pick the brokerage website we're using to set up our account and invest the ones that i love are charles swab fidelity and vanguard i call these the big three the founder of vanguard john bogle is often referred to as the father of index fund investing and if you think i'm a boomer he was even older than me his vanguard group gave birth to index funds so they're the oldest and most trusted let's jump onto their website to see what they have to offer so to get onto their full list of funds just go up to invest in and click on vanguard mutual funds at this point i'm going to have to ask you to strap in and brace yourself because if you haven't seen this page before it can look extremely overwhelming but in a minute you'll be able to impress all your friends when you know exactly how to read it see what i mean there are just so many options the main things to focus on are the expense ratio which is how much they're going to charge you per year you obviously want to keep these as low as possible and luckily with vanguard fees these are very low anyway the other thing to look at is the average returns and they break these down nicely on the right hand side of the screen but of course it's always good to remember that past performance doesn't always mean future returns my wife's a bit like vanguard she likes everything in order and nothing out of place so they have arranged all of their funds into different categories so everything is easy to find category one is bonds these are a type of contract that companies and governments sell when they need extra money if you invest in these they promise to pay you back in the future these are often seen as pretty low risk but also pretty low returns therefore the older you are the more bonds you should have in your portfolio number two is balance funds the idea of these is to pick the age at which you wish to retire and they'll do all the rest of the work for you and find the right mix of index funds as you can see these go up in five year intervals and you can pick whichever suits your plans best this could be a good option if you wanted to invest without thinking about it too much but personally i always prefer manually investing it's a bit like driving an automatic car that does all the work for you it just isn't as much fun as a stick shift number three is company location and size known as small medium and large cap here you can find v fix which tracks our old friend the s p 500 this little s means it's one of vanguard selected funds which they recommend if you click on it you're able to see exactly what companies you would be investing in and also the risk level vt sacs is another good one which is a total stock market index fund which has over 3586 different stocks this allows you to invest in the entire usa stock market in one click there is a minimum investment of three thousand dollars again but as before there's also an etf version with no minimum called vti then you have international stocks quite a cool one is emerging markets which invest in companies based in china taiwan india and many more but as you can see this is a five on the risk scale so i wouldn't personally invest a lot of money into this fund because look at me i'm a bit old to be taking too many risk and i need to sleep at night number four the last category is sector based so if you have a particular interest in energy healthcare or real estate you can invest into these sectors and there are also a lot more options for sector investing in the etf so now we've broken down what's on offer hopefully it all looks a bit more understandable now for the moment you've all been waiting for it's time to invest my ten thousand dollars i could split this between lots of different funds but personally i like to invest the majority of my money into american companies i would say probably about seventy percent american 20 in other countries including the uk and ten percent in some bonds i like to keep the bonds quite low as i don't mind this little extra bit of risk because i'm only 53 and i have a bit of time before i've got to rebalance my portfolio to secure my investments but that's a personal choice depending on your risk tolerance the funds that are available are different in every country but the indexes they track are very similar so you may need to invest in a different fund to me but obviously you can still use my percentages as a guide so i'm going to use the uk vanguard site to invest 5k straight into this etf that tracks the s p 500 so here we go all done two thousand dollars is going into an index fund that tracks the total american stock market so again we go on the screen click so far that's 70 invested in the biggest economy in the world which of course is the usa now i like to balance this out by investing in a different economy as i live back in my own country i'm going to be putting 2k into the ftse 100 index fund so looking good all done great now i've invested 90 of my 10k and i'd like a bit of security let's just put the remaining 1k into a global bonds index fund and let's just do that so just like that i've invested in the usa companies like apple amazon tesla and google i own a small piece of the biggest companies in the uk like hsbc bp and unilever and i have some bonds to balance out my portfolio it really is as easy as that so i'm going to leave the next video up here but don't click on it just yet remember to subscribe to the channel if you want to grow your wealth ring that notification bell and smash that like button okay i'll see you on the other side
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