8 Simple Steps to Start Investing [Investing for Beginners]

hey bowtie nation joseph hogue here with the let's talk money channel and a special video today that i know is going to change a lot of lives out there nation we talk a lot about picking stocks here on the channel but sometimes i think we're making it just a little more complicated than it really needs to be it's not just here but any investing blog or flip on cnbc and they expect you to hit the ground running like warren buffett himself it's easy to get overwhelmed and you end up not starting on that investing journey that's gonna set you financially free i did a poll of the group last year and found that one in five of our bow tie citizens out there haven't started investing yet and half of you have just begun so we're going to change that right now i want to get every single one of you out there started investing and making money in this video we'll cover the most important investing questions for beginners at every step of the way to get you started every question that you have about how to start investing we're going to cover it right here and then i'm going to tie it all together with a step-by-step strategy that you can use to make a 3 000 monthly income on just 15 years of investing and from small investments so be sure to stick around for that for those of you that have already started investing though it's going to be a great refresher course on those basics that will make you rich how much should i invest it's one of the most common questions i get about starting investing and really the one i think keeps most people from getting started and the best and the worst answer here is just invest what you can i know it's not the easy answer that you want but it's also the truth i'll show you how to plan your finances around investing next but there is just no set rule for how much you can invest in our step by step later in the video i'll show you how to turn 150 or 300 a month into three thousand dollars monthly income but that's not a rule and might not work for you nation you're going to hear things like invest 10 percent of your income or calculators telling you how much you need to invest but they all leave out one critical detail that's you your own income your own budget those are both going to determine how much to invest each and every month now here figure out what's left in your budget after paying those must pay expenses i would recommend starting with at least 100 or 150 a month but if you can't do that just start with 50 a month what is important here and i probably should have led with this is that you get started investing you start building that habit of putting money in stocks each and every month no matter what whether it's 250 a month or 25 bucks and once you build that habit then you can worry about whether you're investing enough to meet your goals but i want you to get into that habit first we're just getting started but i want to get your input on this as well what is or or what was your biggest obstacle to start investing what's that one question that you just aren't sure about and is keeping you from getting started we're covering a lot of these questions here but i want to make sure that i help you get started so scroll down and tell us in the comments below next here it is critically important that you get ready to invest and this is something most investors just don't do now what i'm talking about here is about getting your finances ready getting them in order for you to start investing because nation it's one of the most heartbreaking things to see and it happens all the time a lot of people that i see out there but i see people start investing they're motivated and their portfolio is growing then something happens and they have to withdraw that money and this is so demotivating having to start back at zero and a lot of people just give up they never get back to investing and it just ruins their lives so just a few recommendations here to get your finances ready to invest first is you need at least a month's worth of expenses tucked away in savings now i know a lot of people are going to tell you to have three to six months of expenses saved before you start and i'd say three months is probably a really good target here but i don't want you saving forever before you start investing the important point here is you have some of that what if money in savings so so you never have to withdraw your investments next is if you can't scratch together at least a hundred and fifty dollars to invest each month it's time to take a hard look at your budget and your income and that's something most people don't think about that income side of the equation yeah you can usually find an extra 50 or so in the budget to invest but sometimes you just got to realize you need to make more money now we've got a lot of great videos on the channel for building that passive income and starting a side hustle i'll link to a few of those in the video description below so make sure you check those out but as you're planning here i also want you to not be investing every single dime sacrificing everything and just being miserable i fell into that trap in my early 20s i was saving every penny working two jobs and managing my own rentals i was living on ramen noodles and having zero fun just so i could invest more money the problem is i'd burn out every six months or so and just go on a shopping spree i'd set myself back two steps and it was because i didn't have a plan for what i could realistically invest and still be happy in the now so take a look at that budget set an amount to invest that can get you to your goals but is also going to leave room for enjoyment in your life now you're ready to start investing but what do you invest in you've got the money what do you put it in for that maximum return first off here i want to reveal one of the greatest lies of investing that it's all about picking stocks in fact investing is much more about that regular amount you invest and just watching it grow over 10 or 20 years so don't stress out so much about picking the right stocks honestly the best strategy for your investment dollars and this is one that i use with my own portfolio is called the core satellite approach now the strategy is called core satellite because you have that core of investments that make up maybe 60 or 75 percent of your portfolio these are an exchange traded funds or etfs for example you might have 15 of your money in the vanguard real estate fund that's ticker vnq which is going to hold shares of companies in that real estate sector maybe you hold another 10 percent of your money in the vanguard long-term bond etf ticker blv which invests in hundreds of bonds and pays a 3.3 dividend finally maybe you hold another 50 percent of your portfolio and a few funds like the pro shares s p 500 dividend aristocrats etf ticker nobl a fund of the best dividend stocks in the market so by investing most of your money that course 60 to 75 percent in three to five funds you get instant diversification across stocks bonds and real estate your money is spread out across hundreds of stocks you've got bonds in that bond fund and cash flow from the real estate funds then with the satellite portion of your portfolio that remaining 25 or so of your money you can invest in individual companies that you really think could produce those higher returns and the beauty of this core satellite strategy is that because you only have about 25 percent of your money to invest in these individual stocks and say you invest maybe three to five percent in each of these that means you're only picking maybe eight to ten or fifteen at the most of these individual stocks so instead of having to find 20 or 30 or 40 stocks doing the hours of analysis on each one and keeping them up to date you only need those handful of winners nation this is so powerful because it's going to cut in half the amount of time you spend looking for stocks to buy and then following your investments you don't have to worry about those three to five funds you hold they're diversified across a group of those stocks bonds and real estate so they're always going to be getting that average return on their investments okay you have an idea of the stocks you want to buy now where do you buy them which is the best online platform for beginner investors there are a million and one investing platforms but honestly they're all pretty much the same there are three things you want to look for though so let's look at that and then i'm going to share which platforms i use first is you want to look for an investing site that doesn't charge you to buy or sell stocks when i started investing in 1999 brown and company disrupted the industry by being one of the first low-cost brokers at five dollars a trade but even that's too much anymore most of the major brokers and investing apps have gone to totally commission free here it's also nice to use a site that lets you invest in fractional shares that means you can invest in any amount of money in a stock no matter what the stock price is at you can invest fifty dollars in shares of amazon and instead of having to buy a full share of three thousand dollars the site's just gonna split up that share and you'll get fifty dollars worth third here is look for a platform that gives you the investing tools and the research that you need to invest now this one isn't nearly as important as those other two and some investors especially the beginners out there may never need those research tools the trick though when you're thinking about where to start investing is that there's nothing wrong with having more than one investing account in fact between retirement and regular accounts i have nine different accounts on six different investing apps i use e-trade and merrill lynch for the research and some other tools a weeble and m1 finance for investing because of that commission free trading i also have accounts on ally and fundrise it's free to open an account and a lot of times you'll get a bonus like free shares or cash when you make your first deposit like with weeble if you use the link i'll leave in the video description below another great question i get from beginner investors all the time is how do i start a portfolio you've got the money to invest you have an idea of the stocks and the funds that you want to buy and the investing site you want to use now the question is do you buy them all at once with just a little in each or do you invest everything in one stock each month and i would definitely recommend buying all your stocks at once putting a little in each and then adding to them each month the reason here is if you buy just one stock a month putting all your money into it there's going to be a long time when you have a lot of risk just in one or a few companies for example even if you're planning on investing in just 15 stocks or funds for six months you're going to have all of your money in just a handful of them that is a huge amount of risk think about it if you've got just six stocks that's 17 of your money in each one now let's say two of those stocks fall hard on some bad news each losing a third of their value and because you had so much of these in just these two stocks your portfolio is now down over 11 and that's if all the other stocks are holding steady but if you had started your portfolio with all 15 stocks then you'd have about seven percent in each that same drop in two of those stocks would hurt but your portfolio would only be down about four percent and not nearly the same level of pain again this is where using an investing app that allows fractional shares really comes in handy because you can invest your money each month across all those stocks in your portfolio you don't have to worry about buying at least one whole share of each you can just invest 50 in this one 50 in that one and so on for your whole portfolio okay we're down to actually investing here putting your money down into a stock and this is going to be surprisingly easy i'll show you how to buy a stock on e-trade here but the process is almost identical on any investing app we're here in one of my accounts and let's say i want to buy shares of everyone's favorite stock tesla now if you don't know the abbreviated ticker symbol you can always type in the company name and the drop down is usually going to show you that ticker here on the stock's profile page you see all the basics like price market cap the 52-week range of the prices and then across the top here you can see a bigger chart recent news and options trading let's say i've already done my own research and want to buy the shares so i click over to buy here now this order page is almost identical on any platform you see the bid price of the shares which is the highest price an investor in the market is offering to buy the stock and here the ask price is the lowest an investor is willing to sell their shares for in the market right now now these two prices the bid and the ask price are going to be more important if you're doing options trading because they can be much further apart for most stock investors though this bid and the ask price are going to be less than a few pennies difference and right around the quoted price for the shares in this action drop down menu you can buy sell sell short or buy to cover a stock and we'll select buy and then put in how many shares we want now if you're on a platform that lets you buy fractional shares this is probably going to be just a dollar amount how much you want to invest rather than having to pick the number of shares you want for this price type the majority of the time when you're buying stocks you can just pick this market order type that's going to buy the shares immediately at the current market price these other orders like the limit order are much more important when there's a large bid ask spread and you need to tell the app what price you want to buy the shares again though not really an issue for most stocks the platform is automatically going to show me the total cost of the trade and i'm ready to go just two more questions here to start investing and before i share that step-by-step plan and this is another really common question for beginners and even those investing for a while how many stocks should i own you get all these great investing ideas every day online or on tv and it can get very easy to build a portfolio of hundreds of stocks you just keep investing in everything you read about but you really don't need to research shows that once you get to maybe 20 or 30 stocks in your portfolio your overall return starts to look a lot like the average market return because you're so diversified you've just got a little of everything in your portfolio and it's another reason why i love that core satellite strategy having those three to five funds gives you all the diversification you're going to need in those asset classes then you just pick 10 to 15 stocks of companies you really like stocks you think you can do really well this strategy spreads your risk around with those funds those are going to give you that market return but since you've got a little bit more in those small handful of stocks you get that opportunity for the higher returns just 10 or 15 stocks for that upside shot if a few of those really take off a question here every investor needs to ask eventually when should i sell my stocks you've got your stocks you're investing every single month when do you take those profits and run the simple answer here would be never just hold those three funds and the 10 to maybe even 20 stocks you really like until you retire and start living off your investments but we all know it's not as easy as that even longer term investors don't hold their stocks for that long sometimes you need to sell and you better know when that time comes now i did a full video on this and i'll link to that in the description below but it really comes down to three problems that i watch for in my stocks first is if there's a scandal or a lawsuit in the company and then no accountability by management hey we all know that bad things happen to good companies and even the best run into problems sometimes but if management doesn't step up and say this was my fault here's what i'm doing to fix it then i'm dumping the shares another problem i watch out for is a company piling on too much debt i've just seen this become a problem too often in the past and companies go on an acquisition spree buying up everything they can and they fund it with mountains of debt and of course those acquisitions never go as planned and the debt payments just become unsustainable the dividend is cut the share price plummets so i want to be out before that happens the third signal here is if the stock price just reaches where i think it should be whenever you're investing you need some kind of an estimate whether it's from analyst targets or your own of how much that stock should be worth and now you know i wouldn't necessarily sell a stock just as soon as it reaches that target but if it goes much higher i'm looking for something with a little more room for return so now you've got that roadmap to start investing and be sure to ask any questions you still have in the comments below because i want to make sure you're set to start making money now though i had an idea and i wanted to share it's a step-by-step strategy to start investing and give you an extra 3 000 or more a month just from your investments understand this is just a general plan i've suggested amounts to invest here so anyone can get started but if you can invest more you'll be able to reap those benefits even faster here's the plan you start that first year investing just a hundred and fifty dollars a month following the outline we went through in this video that first year you're just getting used to investing putting that money away and watching it grow and i started you off slow in that first year to make sure that everyone can get started this second year we're going to increase that monthly amount to 300 so you've got a whole year to play around with your budget and your income so you have that money available now we're going to be doing this for three years 300 a month and this is to build that rock solid habit of investing each and every month most of your investments here are going to be in those riskier stocks like tech and communication services for that higher return you've got more than a decade to let them run so it's a great time to take that risk right here this is also a runway though you've got three years of investing that 300 a month but then we're increasing it to 500 to really start building your wealth so in that three years that's a perfect time to start building up your income sources maybe start those passive income sources that we talk about on the channel so you're ready to invest that 500 a month starting in year four and by the time that year comes that year four you've got that habit and the cash now it's just a matter of putting it all to work at a modest 10 annual return here you've seen your portfolio rise to over twenty thousand dollars and you can really start to see it grow you're gonna be doing this for five years and i guarantee after that first year it's gonna be like second nature for you you won't even miss that five hundred dollars a month by year ten you've got more than eighty thousand dollars in your investments and we're gonna be doing our last increase here for the next five years you're going to invest 650 a month stick with it though find the cash to invest because this is the last five years you're going to have to put that money away and here maybe you can start pulling back some of the risk in those new investments you can start buying those cash flow investments like the real estate stocks the reits and some dividend stocks in your portfolio now these investment ideas are just that ideas i've tried to start you off with a little bit more risk in those earliers but then suggest a little less as you get older basically you're front loading your returns when you can stand the risk and then protecting your money later but you always want to hold that diversified portfolio and use the strategy that we talked about earlier in the video and after that five years of investing six hundred and fifty dollars a month that's it that's all you need to produce that three thousand dollars a month income when you retire and i'm going to show you how to do that in a minute feel free to keep investing here for more income or just enjoy the extra money each month and here you might have more of your investments in safer sectors like utilities and consumer staples just to make sure your money is there when you need it but at this point you can sit back and watch your wealth grow and after 15 years of investing less than the time it took to hit puberty for some of you you've invested 87 thousand dollars and are eventually going to see it grow to three quarters of a million that's 750 000 and you can safely withdraw about five percent of that each year letting the rest grow that's going to produce seven thousand five hundred dollars a year more than three thousand dollars a month for the rest of your life and that's if you stuck to that modest plan to start investing just starting with a hundred and fifty dollars a month most of you hard charges out there you're going to have more money to invest each and every month and you're going to build a bigger portfolio click on the video to the right for my favorite side hustles to start 10 side hustles that will immediately give you extra cash to invest don't forget to join the let's talk money community by tapping that subscribe button and clicking the bell notification

Channel: Let's Talk Money! with Joseph Hogue, CFA

Views: 676,718

Keywords: how to start investing 2021, how to invest, investing for beginners, how to get started investing, stock market for beginners 2021, investing 101, investing for beginners 2021, investing for dummies, how investing works, how to invest in 2021, investing, stock market, investing 2021, investing in stocks for beginners

Id: oRxz_0s875I

Length: 18min 14sec (1094 seconds)

Published: Wed Dec 09 2020