10 Things I Wish I Knew Before Investing

hey guys welcome back to the channel in this video i'm going to be going through 10 things i wish i knew before i started investing so hopefully we can get through these 10 in around about 10 minutes so time is on let's get stuck into it and the first thing that i really wish i knew before i started investing is that the pros that you see on tv they rarely get it right and you definitely shouldn't trust them when you watch shows or when you watch programs like cnbc they will have one or two people on to talk about a stock with the positive sentiment you know notable names they'll talk up the stock and then later on in the day they'll get another two people again notable names and they'll come on and they'll talk crap about the stock and tell you why you shouldn't buy it so if you just trust what you see on tv you'll probably end up with about a 50 success rate and the other thing to consider when you're listening to experts talk whether it be on youtube or or tv or whatever is that the the experts when it comes to stock market investing they're playing a completely different game to the rest of us right these guys are managing millions or billions of other people's dollars okay and they're operating you know they're operating to win reputation and to win clients and a lot of the times their funds have rules as to what they can and can't do what they can and can't hold so at the end of the day the people you see on tv are playing a completely different game tour so it's best just to let their recommendations or their tips just fly on by in one ear out the other because really at the end of the day it's it's like listening to and taking on board rugby strategy when you're actually playing cricket so it's best just to not really listen to all of the stuff that you hear from the experts on tv anyway that's the first thing i wish i knew second thing i wish i knew before i started investing was that the brokerage costs can really impact your returns as a new investor so for those that don't know what i'm talking about if you're a brand new investor and you want to invest through your online brokerage account you have to pay your online broker a fee when you buy a share or when you sell it as well so on the way in you have to pay them and on the way out you have to pay them too so and the reason for this is because that's essentially what that brokerage site does so it's like you're paying the brokerage site for their services of helping you buy or sell shares but the thing is if you are a brand new investor maybe you're only starting out with a thousand dollars say your brokerage cost is ten dollars you have to pay that on the way in and the way out well already you have to get a two percent return just to break even so you have to already get two percent on that investment just to not lose money okay so it's small but it's something to factor in whereas if you found a if you're with a brokerage site that say had thirty dollar brokerage that's a significant amount more right you pay thirty dollars on the way in you pay thirty dollars on the way out all of a sudden your one thousand dollar investment has to get at least six percent plus six percent just to break even so there is a definite advantage in shopping around if you're a new investor for different brokerage options um for me here in australia the best i've found for australian shares is self-wealth i think they do 9.50 brokerage and if you are in australia and wanting to invest over in the us i would definitely recommend steak of course steak do brokerage free share trading the only fee you have to pay is the foreign exchange fee which is not like a stake special all of the different brokerage sites also charge that fee when you're investing overseas but usually other brokerage sites also charge you international brokerage fees whereas stake doesn't so definitely recommend if you're looking to invest overseas have a look into stake but anyway with that said that's the second thing i wish i knew that brokerage charges can really hurt you if you're dealing with small sums of money anyway number three next thing i want to talk about things i wish i knew before i started investing is that you don't have to be a stock picker when people think about investing they think about having to pick the winners right oh i'm an investor i bought that company and i bought that company but some people don't know that you can just buy a small sliver of the whole market and tracking the market history has proven that that's actually a very viable and lucrative strategy i mean if you look at the australian market we've got 115 or years or something 117 years of stock market data and the data shows that just the market in general goes up at about 13 each year that's their average annual return if you look over at the us the s p 500 goes up at an average of seven eight percent per year now it doesn't always do that right so you can't trust in that number that that will happen every year but if you zoom out and take an average over a very long period of time that's what the average comes out to a lot of people don't know that you can just invest easily across the whole market so there are these investments called etfs etfs pull up all the investors money they take that massive you know pile of money and they just invest it across the whole market so by buying a share in some of these etfs then you're literally getting diversification across the whole market but you're only buying one investment so it keeps the brokerage cost down gives you exposure to the whole market and it's a stress less way of investing right you don't have to you don't have to pick individual companies and read their annual reports you just trust in the whole market and let that compound for you over time now following on from that the next thing i wanted to talk about the next thing i wish i knew before i started investing is that to be honest most people don't beat the market when they're investing most experts most expert investors don't beat the market when they're investing it's just a fact you might you know you might be saying oh you're probably that's you're probably overstating that a little bit i'm sure a lot of them do actually no not very many of active funds actually beat the general market return okay let's have a look at the actual statistics right now i'm going to draw up the chart on screen if you have a look here in australia right over the past five years 80 percent of active funds have not been able to beat the asx 200 that is the index that tracks the australian market how about we look over in europe maybe it's maybe australia's an outlier nope europe is the exact same 80 of active funds have failed to beat the s p europe 350 and then well what about in america well in america the story gets even worse 82 of active funds have not been able to beat the s p 500 over the past five years so it's truly staggering these are the experts that you do see on tv they are the ones that are controlling these funds managing millions and that's another reason why you shouldn't really listen to what you hear on cnbc etc most of these guys perform really poorly they just do not beat the market so there's a definite power in passive investing that investing strategy i was talking about before owning a little bit of the whole market and just letting that go over time anyway that is the fourth thing i wish i knew before i started investing most people actually do not beat the market now the next thing the fifth thing that i wish i knew before i started investing i wish i knew about this book this is rule one by phil towne in my opinion this is the most criminally underrated uh stock market investing book of all time people always list you know barefoot investor or the intelligent investor or whatever this book if you are new to investing you want to learn how to pick individual businesses to invest in read this book trust me it's a pretty easy read it's not very long the reason i like this book by phil towne is that this book details the warren buffett method of picking stocks understanding the business checking for competitive advantage analyzing the management team and valuing the company and making sure you're only buying a margin of safety and while many other books they kind of just dance around the surface yeah warren buffett he says you've got to always understand the business no no phil town actually goes in depth and says all right we're talking about competitive advantage this is how you assess for a competitive advantage in a particular business yeah we talk about margin of safety this is how you actually calculate whether your stock is at a margin of safety price so that's why i really like this book it is well written and it actually goes into depth telling you about how you actually implement the strategy so there you go i sound like a salesman for this book but seriously i do recommend it if you haven't read it do yourself a favor doesn't matter regardless of your investing experience if you haven't read this book definitely read it anyway moving on to the sixth thing i wish that i knew about investing before i started this one is relevant to australians and that is that here in australia without taxation rules if you hold your investment if you hold your shares for longer than 12 months only half of your capital gain gets taxed so the way it works here in australia when you sell when you realize a capital gain so when you sell your shares or you sell your property or whatever it is your investment property then the capital gain that you you make in that year in the year that you sell that asset gets lumped on top of your taxable income and then it gets you pay tax at your marginal rate however for australia we have this awesome rule where if you hold your assets for longer than 12 months then basically only half of your capital gain gets lumped on top of your income and assessed and you pay tax on that amount so it's a really great rule it encourages australians to hold their investments for longer it definitely helps australians be less speculative and think more about the long term so that is something that i wish i knew definitely if you are staring down the barrel of a large capital gain that's going to be particularly relevant for you just to think about whether it's going to be smart tax wise to hold it for longer than 12 months so you get that 50 tax reduction on the gain so that is the sixth thing that i wish i knew about investing before i started the seventh thing i wish i knew is that it's okay to be slow okay it's totally okay to be the world's slowest investor if it takes you a month two months six months a year two years to actually study the stock market understand whatever strategy you're looking at whether it be passive investing or individual stock selection warren buffett style it is okay to take your time and just it is a much better strategy to take your time and get it right than to have a half understanding and just try and get into the market as quickly as possible i know that what we always say you know when we talk about investing is it pays off to get into the market as early as possible and that's true to an extent because obviously the longer our compounding period the better off will be because compound interest works exponentially however it is much better to take the time to really understand what you're looking to invest in before you pull the trigger i know when it comes to investing there's fear of missing out is a particularly big issue particularly with new investors good old fomo but trust me in the long run it is better to take your time relax the stock market's still going to be there in two months the stock market's still going to be there in five or ten years so it's okay to take your time try not to succumb to the fear of missing out okay make sure you fully understand what you're looking to invest in before you invest in it with that said moving on eight thing that i wish i knew before starting out on my investing journey this is another one relevant to tax and that is that capital losses can be used to offset your capital gain again this is here in australia i'm not sure if you're watching this from outside australia i'm not sure what the tax rules are in your country so make sure you check that but here in australia if you make in one financial year if you make a capital loss you make a capital gain the losses can be used to offset the capital gains so overall you pay less capital gains tax so this is particularly relevant you know if you are if you're if you've realized a large capital gain okay and you're staring down the barrel maybe it's close to the end of the financial year you're staring down the barrel of a quite a substantial capital loss you can realize that loss in that financial year to reduce the tax you'll pay on that big capital gain that you made okay that is completely legal you're allowed to do that you're allowed to realize a capital loss to offset your gain and it's particularly efficient when it comes to tax so definitely consider that if you haven't if you maybe if you didn't know that there you go but yeah definitely being able to offset your capital gains with capital losses that is a very handy rule and if you make a capital loss that can be carried forward to future years right so if you make a capital loss in one year you had a company an investment that went bad on you you had to sell it a big loss and then the you don't make any capital gains in that year but next year okay so next year you make this massive capital gain but you don't have any capital losses in that financial year your capital loss from last year carries forward it continues to carry forward indefinitely so you can use those capital losses to offset those future capital gains so that's another one to consider anyway almost at the end of the video the ninth thing that i wish i knew before i started investing is that there is definitely a difference between speculating and investing this takes a little while if you're new to the game to fully understand but a lot of people think they're investing but they're actually speculating they're just gambling in the stock market you know frank told me last week that this share is going to go up 100 this week i'm going to buy into it that is speculation that's not an investment the way i like to define an investment is going back to that benjamin graham definition he said an investment operation is one which upon thorough analysis promises safety of principle and a satisfactory return okay that is the important thing you have to take the time to understand what you're getting yourself into understand the company understand the cash flows that you're going to get out of that company as an owner of that business you have to make sure that it's got low debt you know that it's not a high risk business so you protect your principal you protect your capital that you've put into the investment and then once you've got that protection then you try and make that modest return on top of that that is investing investing is not oh i really like the look of this company you know i really like the name i've heard of the ceo before i'm going to buy shares in it why not that's not investing that's speculating investing is taking the time understanding your investments finding that competitive advantage doing your due diligence on the management team checking for margin of safety and the valuation all that stuff that is investing anyway with that said the last thing that i wish i knew about investing before i started was that you can literally see every single quarter what the best of the best are buying and selling true story okay if you didn't know this this is called the 13f filing over in america this is for yeah for american people american businesses essentially i'll read you the investopedia definition a 13f filing is a quarterly report that is required to be filed by all institutional investment managers with at least 100 million in assets under management it discloses their equity holdings and can provide some insights into what the smart money is doing in the market so for instance you can you know warren buffett straight away you can log on to a website something like guru focus i'll show you this example with guru focus you can log on and you can look at what warren buffett's last 13f filing looked like and you can see what he's been buying and what he's been selling so you can see here this is at the end of q1 2020. warren buffett he reduced in goldman sachs he reduced in jp morgan you can see he's sold out of phillips 66 you can see he added delta airlines now the thing to remember here is that the 13f filings are always backwards looking right they're always looking backwards because they get released after the fact after the quarter's finished then you get to look back at what the investors actually did so if you have a look at this example it says here that for the most recent warren buffett 13f that we've got that he was buying delta airlines but in reality he's actually since sold out of that position completely so you don't want to be fooled looking so far into the past and make an investment decision you know based on what one of these guys are buying into but in reality they've actually sold out of it to be honest buying a stock or a company because one of these guys has bought it is a terrible investment decision anyway but the the thing that's useful about 13f is that it can put new companies on your watch list right so you can see oh warren buffett's making a substantial investment in xyz company i might go and have a bit of a research of xyz company and try and figure out why he's bought into it is there a competitive advantage there what price was he buying in at okay is that a margin of safety prices getting in at you can learn a lot from looking at the 13fs and keeping track with what the best investors of the world how they're going about their investing what they're buying and what they're selling so anyway guys with that said that was way longer than 10 minutes but these are some really interesting points they're definitely 10 things i wish i knew before i started investing i pro i didn't know any of these to be to be perfectly honest i didn't know any of these points before i started so these are all true points that i definitely wish i knew so i hope that maybe that helps you out if you are someone that's looking at getting started with investing in the next little while definitely definitely listen to those points because they are 100 very important anyway guys that is it for this video leave a like on the video if you did enjoy it or if you found it useful make sure you subscribe to the channel as well if you like the content if you watch it regularly maybe if you're not subscribed already just click the subscribe button it's of course the easiest way to support the channel as well so thanks very much for doing that of course check out profitful if you would like a full step-by-step walkthrough on either the active investing warren buffett style strategy or if you just want a walkthrough of the passive investing market tracking etf kind of strategy that exists out there then definitely check out profitful links in the description below but that will do me for today guys thank you very much for watching as always and i'll see you in the next video [Music] um [Music] um you

Channel: New Money

Views: 172,533

Keywords: stock market, aussie, wealth creation, how to buy stocks, beginner investor, how to buy shares australia, stock market investing australia, stock market investing, financial education, stock market for beginners, how to invest, investing for beginners, stock market crash, how to invest money, how to invest in stocks, how to invest 1000 dollars, investing for beginners 2020, stock market for beginners 2020, stock market for beginners australia, how to invest australia

Id: aZzwrTX8BOg

Length: 19min 39sec (1179 seconds)

Published: Thu Jul 23 2020