How To Become A MILLIONAIRE: Index Fund Investing For BEGINNERS | Minority Mindset

do you want to know the real secret to building wealth in the stock market here's a hint it's not by hoping you find the next amazon up everybody i am justin singh and welcome to the minority mindset where we help you rethink rich at the minoritymindset.com the stock market is one of the most accessible wealth building tools that you can access but lots of people never actually end up making money or building wealth in the stock market there are essentially two ways that you can invest in the stock market you have the cool way oh yeah and then you have the boring but profitable way oh yeah when most people invest in the stock market they're trying to find the next amazon or tesla they're trying to be cool it's the cool way to invest because you want to find the next hot stock and buy it before it gets big you can make a lot of money doing that but it takes a lot of time and it takes a lot of research and most people don't actually put in the work to do it they're just gambling and there's a lot of people especially when you first enter the stock market they get really allured by this idea of being able to flip a stock very quickly for a huge profit like you see this penny stock trading at four cents a share and you think whoa what if i buy a thousand dollars worth of this stock and it goes up to eight cents a share that's not that big of a jump if that happens i'm gonna make a thousand dollars and if the stock goes up to a dollar i'm gonna have 25 000 doing nothing and the next thing you know your money is gone because that stock went out of business trust me i know i've been there even if you're too smart for penny stocks and you're investing in well-established companies chances are you felt the pain of investing in a company and then you see your stock go down i mean that's why so many people are searching why do stocks go down when i buy them on google so now you have a lot of people that are investing in companies and losing money and then you also have this big group of people that are scared to invest in stocks because they see all these people lose their money but there is another way that you can invest in stocks that doesn't have as much risk where you don't have to try to find the perfect company where you can build sustainable wealth the downfall with this is is kind of boring it's not as cool as trying to find the next amazon so what is the secret system index funds index funds not to be confused with indexed fingers or index cards are a simpler but boring way for you to invest in stocks and build profit over the long term while compounding your wealth that's why in this video i'm going to be going over index funds and more specifically vanguard index funds and you'll see what i mean in just a minute but before i get into that i need you to do me a quick favor and smash that thumbs up button below because the way the youtube algorithm works if you do not smash that thumbs up button then youtube is much less likely to show you and other people our financial news and education videos and index is a group of stocks is a segment and a fund is something that you can invest in so as a simple example let's say you really like tech companies but you don't know how to find the best tech stock so let's create a tech index fund so remember an index is a group of stocks and in this we're going to create one right now let's put in amazon am z and these are the ticker symbols facebook google what's another tech stock apple aap so now we have just created an index which is a group of stocks now if you want to invest in this group of stocks and you don't want to individually invest in all these companies you can invest into this fund so now this has just become a fund this fund invests in these individual stocks and you can buy shares of this fund now you're not going to be the person that's actually creating the fund because there's a lot of complexities into that and they get a lot bigger than this i'm just showing you kind of as an example of what an index is but you as an investor can invest into a fund which invests in a bunch of stocks that way you don't have to try to find the best company to invest in the reason passively managed index funds had become so popular is because back in the day the only way that you could invest in funds was by investing in what's called actively managed funds here's the thing someone or something has to manage this index of stocks because if facebook goes out of business because people don't want facebook anymore and people stop buying apple iphones then what's going to happen to this fund you're going to have only some stocks that are doing well in all these stocks that are going bankrupt and if that's the case your investment is going to tank so someone or something is going to have to actually manage this fund to make sure that the stocks in here are doing well and you're not going to be the one doing that because the whole point of investing in this fund is so that you don't have to do all the work in actively managed funds what would happen is you would have this person right here manage this index so let's draw a nice mustache on this person and this person probably went to yale for undergrad and they went to wharton for business school for their mba and to most people that means they're probably very smart now to me i'm sure they're very smart but what that means to me is they're probably going to charge you a whole lot of money and that's exactly what these money managers did so they would create this fund and then they would charge you a whole lot of money so this is you the investor and a lot of your money would go right into this person with a mustache's pocket so if you wanted to invest in stocks but you didn't want to put in the time and effort to research companies and to manage your stocks then what you would do is you would hand over your money to this money manager with a mustache who went to yale who went to wharton who is now going to charge you a whole lot of money to take your money and put it into this index or fund that they are managing and if your index your investment goes down they're still going to charge you a lot of money this model is why index funds as we know them today were created now i have nothing against mustaches but i really like the idea of people being able to invest their money without paying all their money and fees the way it worked is instead of having this guy with a mustache manager money how about let me raise the mustache and the person how about we just have a computer manager investments because computers are a whole lot cheaper to manage and we can just tell the computer hey why don't we just create this investment where this thing this fund invests in the top 10 tech companies and now if facebook goes bankrupt this computer can automatically kick facebook out and put in a new company so this was automation coming into the money management and investment game because now instead of paying an expensive money manager people can create an algorithm of what type of companies they want to invest in and so if you want to invest in the top 10 tech companies and one company goes below that threshold this computer will automatically kick this company out of the fund and bring in a new company like if facebook goes out maybe snapchat will come in this computer will automatically calculate that and make these transactions that way your fund has the stocks that you have in the algorithm two things happen when you do this first you as the investor you get to save a whole lot of money because managing a computer is a whole lot cheaper than paying a money manager who went to yale and who went to wharton to manage your money and second you get to take the emotion out of investing the reason so many people including high paid money managers lose money in the market is because people are emotional beings when the 2020 pandemic hit in the stock market crashed do you want to know what a lot of expensive money managers did they sold they were selling stocks out of their fund out of fear if your fund manager makes bad trades and you lose money you lose money in your investment but you also have to keep paying your money manager look there's a time and a place for actively managed funds but if you really want to get the good money managers you need a lot of money to invest with them so now we're talking millions of dollars if you don't have millions of dollars to invest chances are you're not going to get access to the greatest money managers passively managed funds let you invest your money into stocks while paying low fees and a lot of times these passively managed funds will get you better returns than actively managed funds and you get to pay way less in fees but in order for index funds to build you wealth and really make you money you have to invest in them the right way because this isn't one of those things where you can just invest in an index fund on monday and expect to be rich by wednesday index fund investing is a long-term wealth building tool and the way you make the most money and build the most wealth by investing in index funds is by investing money consistently into the index funds and investments that you have so this is investing money every week or every month into your funds now investing has risks okay you are never guaranteed to make money when you invest you might even lose money so make sure make sure you always do your own due diligence and never blindly listen to a random guy on youtube but let's take a look at this so voo is an index fund created by vanguard and voo invests in the top 500 companies in the stock market okay so voo is that index fund and invest in these top 500 companies so now what you can do is you can invest into this fund again i'm not telling you what to buy as an example and this fund gives you exposure to the top 500 companies between november of 2010 and november of 2020 vo this index fund returned an average of 13 a year over the last 10 years this doesn't mean that the fund went up by 13 every single year consistently it means some years it went up more than 13 some years it went down by 13 but on average over those 10 years this fund went up by 13 percent a year let's put this in perspective let's say you had 10 000 and you put this money into the bank and i'm gonna be very generous and i'm gonna say that your bank paid you a half of one percent a year in interest if you did that over ten years your ten thousand dollars would grow and it will grow to a whopping ten thousand five hundred dollars after one decade if you put your ten thousand dollars here into this index fund that gave you general exposure to the stock market then your money would have grown from ten thousand dollars all the way up to thirty three thousand dollars and this is on the side without you doing any work you just put your money in and then you go do something else now i get it hindsight is 20 20. of course it's easy for me to look back and say hey you should have done this but this is the reality of how investing works okay if you don't take risks your money is not going to grow again past performance does not indicate future performance but let's just assume for a second that you can maintain that 13 return that we just saw in the previous example but let's say that you don't have 10 000 to put into an investment so instead of putting 10 000 cash into an investment you do something a lot smaller you do 250 dollars a month now whether the fund goes up or down you're gonna put 250 a month every single month into your fund and you're gonna do this no matter what and they're gonna do this for 10 years so for the next 10 years you're going to keep putting 250 a month into your investment and over those 10 years you will have put 30 000 dollars into your investment but assuming you get the same average return your 30 000 will have grown to 63 000 on the side but let's keep going let's say you do this for another 10 years now you will have put aside 60 000 so this is 10 years another 10 years over 20 years into your investment money but because you're investing this money you will have grown this money to over 270 thousand dollars you got more than a quarter million dollars in your investment count because you're investing this money passively again this is assuming you got a 13 return but i got this number from the last 10 years of how the stock market has grown and how these index funds that match the general stock market have grown i'm not saying this is what's guaranteed but i'm showing you what's possible if you invest your money and the great thing about this is this investment is passive you're not trying to find the best stocks you're not trying to research other companies you're just putting your money into an investment that's investing in stocks for you the reason so many people don't do this is because investing in passively managed index funds is not as cool and it's not as hot as trying to find the next tesla or amazon the reality is building long-term sustainable wealth and growing it in the stock market is not easy yeah it looks easy when you're in a bull market because everybody's making money then it's easy you can just throw your money anywhere and you're gonna make money but when things go bad and times get rough which will happen you have to anticipate this this is where you have to have a strategy and if you are investing in index funds it's all about just consistently investing every week or every month and letting your investments grow and compound over time now i'm gonna be talking about some of the different index funds that there are out there for you to invest in but before i do that i want you to be aware of tools that you can use that can help you passively invest your money like a sponsor m1 finance the way it works is simple you're going to create a free account and then you go in and you're going to create a pie which is your investment portfolio where you can enter in what stocks and funds you want to invest in so here's an example of what you can do let's say you slice up your pie into five different slices and now you can divide it up however you want you can have fun one fun two from three fun four and let's say you really like chipotle so you throw one chipotle in there too so now what's gonna happen is anytime you invest money into your pie it's gonna automatically be divided up into these five different things into the proportions that you created so i know my numbers are really rough because this pie is really kind of lopsided but let's say 35 percent of this is one one 25 percent fun too and on and on and on so what happens is if you invest a hundred dollars into your pie 35 is gonna go to fund one twenty five dollars fund two ten dollars to chipotle ten dollars to fund three and twenty dollars to fund for the cool thing is you can automate this process however you want so you can create an automation where every single month 250 dollars is withdrawn from your bank account and automatically gets put into this pie the way that you created it plus it costs you nothing to do this because it's free to create an account and they don't charge you money to invest your money automatically through their passive system so if you want to learn more and start passively investing for free i got the link to where you can do that with m1 finance in the description below minority mindset is a paid partner with m1 finance so if you use them we will get compensated but there's no additional cost to you it's free to create an account and they don't charge you to do the sort of passive investing so if you want to learn more start passively investing i got the link to where you can do that with m1 finance in the description there are index funds for almost anything you can imagine you have a general stock market funds like voo which i talked about voo was created by vanguard but you have other ones like spy which are not created by vanguard both of them invest in the top 500 companies in the stock market but you also have sector specific funds so these are a little bit more narrow so these are things like tech funds and growth stock funds and real estate funds and dividend stock funds vanguard was the first company to really go out and create these type of index funds but now lots of companies have them now i know this might be a little bit confusing but finding an index fund is actually a lot easier than you might think let's say you want to invest in tech stocks but you don't want to actually find the best tech company to invest in so you want to go this fund route so what you could do is you go to google and you just search best tech index funds and what's going to come up is you're going to see all these lists of tech etfs all an etf means is it's a fund that you can buy through a stock brokerage digitally remember back in the day you couldn't always buy these funds digitally you had to call up a broker and manually do it so an etf just means you can do it digitally two things that you want to make sure you pay attention to are what companies your fund invests in and what the fees are again this is very easy to do you just got to google it going back to voo if you go to google and you search voo details it's going to take you to the vanguard website and you can see the list of all the companies that voo invest in and the different percentages that invest in and you can also see the fees which is called the expense ratio at the time we're recording this video you'll see that the vol expense ratio is 0.3 percent which means for every 100 you invest into this fund they're gonna charge you three pennies as a fee for every hundred dollars you invest so this isn't a lot of money because they're using a computer to help manage your fund they don't have this fancy guy an expensive guy with a mustache we have to pay a ton of money to to invest your money and manage your money the key here is having the right mindset because you want to be investing for the long term because this is a long term wealth building play it's also very important for you to stay up to date on what's happening in the top finance of business news that way you can make smart decisions with your money and if you're looking for an easy way to do that that's why we created the free market briefs newsletter where our team first breaks down the top finance and business news and then we show you how this news affects your wallet that way you can be smart with your money this newsletter is completely free and you can subscribe to our free finance and business newsletter by clicking the link up here or by clicking the link in the description below by the way our financial news emails are separate from our financial education emails thank you for watching if you enjoyed this video share with one friend that we could help spread the word if you want to learn more about how you can find a good company to invest in on the stock market i already made a video on this and you can watch this video on youtube by clicking this button right over here thank you for watching and as always keep hustling

Channel: Minority Mindset

Views: 312,580

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, get money smart, vanguard index funds, vanguard investments, vanguard index funds for beginners, vanguard index funds 2020, vanguard index funds for beginners 2020, vanguard index funds dividends, vanguard index funds how to buy, vanguard index funds 2021, vanguard index funds for beginners 2021, index fund investing, index funds, index funds for beginners, index funds explained, index funds vanguard

Id: d1whZ7oBikU

Length: 16min 17sec (977 seconds)

Published: Thu Nov 12 2020