10 Years of Investing In 10 Minutes

all right so today i'm taking 10 years worth of investing experience and i want to shrink it down into a quick 10 minute short video this is your cliff notes version of everything you will ever need to know about investing after this you can walk away you can automate your investing and become a millionaire automatically so if you're ready let's time travel back to 1906 to learn about something called the pareto principle named after italian economist vilfredo pareto in 1906 he noticed that society was divided into two classes twenty percent were the haves and the other eighty percent were the have nots and he noticed that roughly twenty percent of society at that time was responsible for about eighty percent of all economic activity now what's cool is we can take modern day technology and everything we know about the stock market historical performances and statistics and this 80 20 principle to use it to our advantage so we can make money with by the end of this video you will learn that you don't have to have decades of trading experience you don't need to pay someone to invest for you and you don't need to spend thousands of dollars on stock trading or investing courses this is all 100 free all you need is a little bit of knowledge courage some discipline mcfly in just 10 minutes of your time and with that you will become an expert if i only have 10 minutes to teach someone investing this is the video i would show them i'm excited let's get right into it hi my name is andre jake hope you're doing well come for the finance and stay for the short video if you've never seen my videos before i talk about personal finance and investing passive income dividends crypto real estate credit cards crypto first let's talk about the philosophy behind investing and then i promise i'll show you everything as far as which stocks and everything else step by step this is gonna seem like it has nothing to do with investing but i promise it has everything to do with investing it's the story about the fishermen where an american investment banker goes to a small coastal village in mexico and he sees a fisherman who caught a bunch of really big tunas so he comes up to him and he says how long did that take to catch only a little while why don't you stay out a little longer i have enough to sustain my family's needs well what do you do with the rest of your time then i sleep in i fish a little hang out with my wife play with my kids and play guitar with my amigos so then the banker sort of neatly adjusts his tie as he steps on his pedestal and says i'm not wearing a tie my bad he's not wearing a tie in this story but he says well i'm a graduate from harvard and i've got an mba degree and here's what you gotta do stay out a little longer catch more fish and with more fish you'll be able to easily afford a bigger boat and with a bigger boat you can catch even more fish and then leverage that to build yourself a fleet and then you can sell directly to the processor and control the distribution that sounds like it's going to take a while how long do you think that's going to take i'd say 10 to 15 years of course you'd have to move to a major city and do this for a while but it's gonna be worth it okay but then what asks the fisherman and so the banker says well that's the best part when you're ready you take your company public and you ipo for your 8 to 9 figure exit and that's when you can finally move to a small coastal village in mexico where you can sleep in fish a little hang out with your wife play with your kids and play guitar with your amigos what's wrong with that story is now we're back to where we started this is one of my favorite stories about finance and investing because it teaches us to know when enough is enough and the reason that's so important in this part of the video is because it gives a meaning and a context to our lives because when we get up every morning to go to work and we make compromises to save a dollar here and a dollar there to invest it and put it away for a later day sometimes to me anyway it seemed a little pointless what am i working toward and why wouldn't i just use this money right now while i'm alive and i'm happy and i'm healthy and that's how people think that's why the most important question you have to answer first is how much money do you actually need one million dollars now that's how much society tells us we need right you need a million dollars but a million dollars in 20 years is not gonna be worth as much the truth is you probably need nowhere near a million dollars to be considered truly rich and it just so happens that there's a mathematical formula to figure out that number and you need to know what it is and here's how you take your annual expenses and you multiply by 25. now your annual expenses should include everything from your house to your rent to your food to your travel to your entertainment vv nft drops you take all that you add it up and then you multiply it by 25. so in this case if it cost you 30 000 a year to be you multiply by 25 750 000 invested at 4 is how much money you need to be considered rich once you get to that chunk of money it's going to passively pay you that thirty thousand dollars for the rest of your life so you can exist passively without ever needing to work a job now if you do this right and you don't spend more money every year then you can do this infinitely without ever running out of money because it will grow at a faster rate than you can spend it and that's how you'll know when enough is enough now you might be saying well that's way too much money there's no way i'm ever gonna save 750 000 that's going to take me like 50 years but that's not exactly true and here's why it's because of the eighth wonder of the world compound interest now the stock market averages seven percent per year factoring in inflation in a normal economy which we're not in but the point is you're not gonna save all seven hundred fifty thousand dollars by yourself because that is a ton of money instead we're gonna have help from compound interest over time so anytime someone tells you this is an amazing investment it's gonna give me seven percent returns is that good is that bad how could you even tell right what do i compare that to and there's actually a very simple calculation for that it's 72 don't ask me why it's 72 it just says go with me on this one divided by the return so 72 divided by 7 is roughly 10. 10 years is how long it'll take for the stock market to double your money now last year the stock market returned 28.6 which is huge at that rate it would take the stock market roughly two and a half years to double your money that's because 72 divided by 28.6 equals two and a half that's how you can tell this is called the rule of 72 and it's super useful in figuring out how fast your money will double now here's another little trick to help getting you there even faster the next time you buy something or especially sign up to a subscription service take the yearly cost and divide it by .04 so amazon prime for example i feel like everyone has prime at this point it's a hundred twenty dollars a year what price went up ten dollars a month doesn't sound like a lot but 120 divided by point zero four is three thousand dollars that's the true cost of having amazon prime exist in your life passively you need three grand invested in the markets at four percent per year that really changes perspectives doesn't it most people don't think about money when they think about buying things like this they think about it in terms of hourly cost so they'll say to themselves 120 well if i get paid 30 an hour it cost me four hours to pay for the entire year that's easy right but that's not how it works anytime i hear that logic i'm like four hours so just always use this technique of dividing by .04 to figure out the true cost but now let's talk about when the best time is to get into the market and how often you should be investing this is the part of the video where you're going to realize that you don't need to spend any money buying courses to beat 99 of professionals this is a study that's been done time and time again and this specific one shows data over the last 40 years comparing three different examples of people that are trying to time the market in different ways this is going to blow your mind so imagine these three people investing 200 a month for 40 years that's 96 000 in total invested now one of these people invests at the top every single time right before a crash for example in 1987 right before the crash in 1990 right before the crash in the year 2000 right before the dot-com bubble a fourth time in 2007 right before the financial crisis and again in march of 2020 right before the roni rona crash now in 40 years she still ended up with 773 358 dollars she still ended up with more money than she started with even though she constantly bought at the market top then there's the second person britney who buys at the bottom of the market every single time she's a perfect market timer she holds most of her money in cash until there's a crash and then she buys the dip she's basically meet kevin and she ends up with a substantial amount of money after 40 years at 1 million 123 573 then there's steady sarah who buys consistently every single month regardless of what the market is doing regardless of what jerome powell is saying at 200 a month and she ends up with more money than anyone else she ends up with one million six hundred twenty thousand seven hundred eight dollars how is that even possible if britney timed the market bottom perfectly every single time it's possible because sarah was not on the sidelines with cash and because she was in the market the longest and she made the most amount of money so that just goes to show you that even if you could predict the stock market bottom there's no guarantee that you'll end up with more money so now let's talk about exactly how much money you should start investing there's no right dollar amount to invest but you should aim to invest 50 of your annual income so that's how i was able to save a hundred thousand dollars by age 26 making only 50 000 a year every time i got paid i put 50 of it away and the other 50 percent i would live on i know that's easier said than done but i know it's possible because i did it and if you can do that you'll retire in just 17 short years if you want to retire faster though in 10 years then your savings rate needs to go up to 65 percent so if you get paid a thousand dollars a week then you need to put away 650 of that and the rest you need to live on that's very difficult to do at least on 50k a year that's why it's better to work on increasing your income but the formula stays the same i'll leave a cheat sheet down below but the next step is extremely important because we have to set up the right accounts to start investing inside of think of this as sort of like building your perfect team of pokemon some pokemon are better than others which is why you want to pick ones that are complementary to your goal which means stay away from metapods unless you want your life to harden the point is is that all of these accounts make it more efficient when you level up so the first thing you want to do is create an individual retirement account an ira i have mine with m1 finance but you could use whatever you'd like the second one is to get a 401k through your employer set yourself up with that you'll be good to go and for extra credit get yourself an hsa account which is a health savings account it's triple tax advantage but max it out if you can and you can get one through fidelity but once you've set up all of those accounts and they're good to go now we can finally start buying before you download your favorite brokerage and you start buying gamestonk or shibainu because you heard people are becoming millionaires first we have to sort out our priorities and with this one stock which by the way is not financial advice a stock that i've been buying every single day you could own more than 4 000 companies and be extremely diversified and that stock is vti that's the secret now alternatively you can buy a stock like voo which is the s p 500 the top 500 companies in the us but both of these stocks perform almost identically and with this one stock you will make more money than 99 of hedge fund managers are promising to make their clients in fact a 2019 report by the s p dow jones shows that over the last 10 years 89 of large cap funds underperformed their respective passive benchmarks so all of this to say is that even though there's some really smart investors like warren buffett and kathy wood that become famous in some years because they do better than the stock market but over the long term it is almost impossible to beat it so there's no sense in trying remember that the industry only wants to make it seem like investing is really hard but that's because they get paid not based on how well their investments do but based on how much they charge their clients those fees so don't fall into that trap instead focus on maxing out your 401k employer match then go and create a roth ira max it out to the 6 000 then go back to the 401k max that out and then if you have any money left over after that get yourself an hsa max it out and if you still have any money left over after that outside of your taxable brokerage accounts then you can maybe buy some bitcoin or dabble in real estate but that's the priority and after you've learned everything go and check out this video on how to invest like the one percent i promise it's going to change your life or it won't it's 50 50. works half the time every time and as always please don't forget to have a wonderful rest of your day smash the like button subscribe if you haven't already go grab up to 250 worth of free bitcoin with this block file link right here go grab your free stocks links down below and then go track them automatically with a spreadsheet linked down below in my patreon in the meantime i will see you back here on monday and friday sometimes wednesday i'll see you soon bye

Channel: Andrei Jikh

Views: 468,467

Keywords: market crash, crypto, bitcoin, stock market, passive income, dividend investing, dividends, dividend stocks, crypto crash, ethereum, stock market crash, bitcoin crash, NFT, how to buy bitcoin, cryptocurrency, robinhood app, best trading app, stocks, investing, investing for beginners, how to invest in real estate, how to invest in stocks, best stock trading app, credit score, andrei jikh, best investment, dogecoin, bitcoin etf, robinhood, portfolio, everything bubble, wealth transfer

Id: pnIZLvP-7N4

Length: 13min 38sec (818 seconds)

Published: Mon Feb 14 2022