How To Make $100 Per Day With Index Funds

what's up graham it's guys here so there comes a time in everyone's life where you stop and think to yourself how do i make 100 a day investing in index funds all right fine maybe it doesn't exactly happen like that but chances are since you clicked on the video you're at least mildly interested in the combination of investing index funds and passive income or maybe you don't care about any of that but you saw a hundred dollars a day and you realized that's a very seo friendly amount that seems reasonable enough for me not to be skeptical but whatever your reasons i just want to use this as an opportunity to combine three of my favorite investing strategies all in one video since statistically this is the simplest way to build wealth for probably 99 of investors it takes the least amount of time the entire topic could be thoroughly explained in under 15 minutes and come on it's not like anyone would say no to earning an extra hundred dollars a day without having to answer to a boss who tells you not to watch youtube videos while you're at work yeah i'm looking at you right now just keep pretending to be busy okay but seriously let's go over exactly how you could do this in real talk this has been a topic that i've been obsessed with over the last decade and if these strategies have helped me build up a portfolio that now covers all of my day-to-day living expenses chances are it's gonna help you too no this is not something that's gonna happen overnight no i'm not trying to sell you anything no this is not a scam but yes you can subscribe and hit the like button if you find it helpful plus how about this you could watch the whole video and then decide at the very end if it's worthy of your like as long as you promise not to forget so thank you guys so much and now with that said let's begin alright so zoom out big picture earn a hundred dollars a day through index fund investing that's the objective but to break it down a little further it's important to understand why index funds in the first place and not let's say selling covered calls while harvesting organs on the weekend well unlike harvesting organs being very much illegal index funds are not and the premise behind it is very simple instead of buying a single stock of an individual company that may or may not do well an index fund contains a small portion of everything that you could buy into for one low price and then you get the benefits of the entire market without having to do any of the legwork yourself i've mentioned this example before but it's really just the perfect way of putting it imagine i own a thousand apartment buildings and they're each worth a thousand dollars you have the option to do all of the research and buy any one of them for a thousand dollars and known 100 of it outright or you could automatically invest a thousand dollars and now you own point one percent of everything in the portfolio so what do you do well the first option even though you own one building entirely for yourself there's the chance that something goes wrong tenants don't pay the area goes down in value the building needs extensive repairs and now your only investment is worth less or there's also the question of how do you know which apartment building is going to do the best and what if you pick the wrong one on the other hand with the second option by owning a small portion of everything you get the average return of an entire portfolio across a thousand different rental properties and even if a few of them don't do well the rest should more than make up for it without you having to constantly worry about being right well essentially this is exactly index funds explained in a nutshell if you want to invest a small amount to buy all 500 companies in the s p 500 you could do that with something like v phi x for just over 400 if you want a real estate index fund that owns thousands of apartment buildings and hotels there's vig slicks for 150 could also gain exposure to every technology company you could think of with vgt or just buy a little bit of everything with vt sacs that means as long as you literally have a few hundred extra dollars to spare you could practically buy a small portion of every single stock in existence without having to do any of the legwork buying each of them individually and then you could sit back and let the market do all the work for you while you just relax and watch more youtube videos in addition to that because index funds are so simple to manage they're easy to put together and they don't require a lot of overhead those savings get passed on to you as the customer in the form of lower fees that means instead of paying for a fancy investment manager's mercedes s550 car payments you could enjoy the benefits of a passively managed index fund for the low cost of free plus on top of saving more money index funds have historically outperformed more than 92 to 95 percent of professional portfolio managers over a 15-year period and i gotta say i can only imagine how much worse that would be for the individual investor who trades emotionally and tries to time their investments based on whatever is trending at the top of wall street bets or actually i don't have to imagine apparently 99 of investors cannot beat the market long term and lastly you get the ultimate benefit of diversification and stability even if you own 20 or 30 stocks you still run the risk of a few of those going down and lowering your average or being too concentrated in one sector that keeps getting kicked down over and over again like corsair gaming give me a break but with this it's easy there's no stress there's no confusion of what to do just buy into it consistently and you're done so now that we have the index fund portion explained let's move on to the passive 100 a day part because i know that's what you came here for and of course the jokes like this one why did the investment banker leave her husband she was losing interest all right now in terms of passive income the goal here is that it should truly be passive like most people have this idea in their mind that they could wake up one day do absolutely nothing and then open up their computer to see thousands of dollars just magically appear and the truth is it's called only fans just kidding okay no but really when most people talk about making passive income including myself there's always a bit of a catch either it continually requires ongoing work to maintain like a rental property it can be wiped out overnight from an algorithm change like with so many passive income online businesses or it takes a significant amount of unpaid upfront work ahead of time to reap the benefits in the future but with this i'll be honest it is actually a 100 passive income you can make decent money without much long-term risk i do exactly this myself but it requires one skill that most people spend their entire lives learning and that would be patience being able to make a hundred dollars a day passively from an easy investment that anybody could make is going to take time the good news though is that it's not difficult and there's nothing complicated about it but you'll need to be okay building this up and not try to rush the process to make as much money as fast as possible otherwise it's not going to work although i will say this once you start seeing the passive income roll in be prepared to get absolutely obsessed investing everything back into your portfolio to help it grow even faster it all starts small but in terms of combining the two topics and how to make passive income with index funds you have two ways the first and most common approach that most people automatically think of is dividends see anytime you go and buy a stock you're entitled to a small portion of that company's profits and sometimes those profits are distributed to you on a regular basis in the form of a dividend payment in this case since index funds cover such a wide variety of companies dividend payments are almost always a part of your investment generally they'll range anywhere from two and a half percent if you're buying into a real estate index fund one point two six percent if you're buying into the s p 500 1.2 percent if you're buying the entire market or if you're really wanting to go for it as high as seven percent if you're only buying a high yield dividend fund overall though across most index funds you'll find an annual dividend payment anywhere from 1.2 to 2 and a half percent and all of that is probably going to be the easiest passive income you will ever make in your entire life for every thousand dollars you invest you'll be getting a free 20 deposited back to your bank account for doing nothing other than just investing your money now the one thing to keep in mind is that with dividends your income will be taxable and it's important to use this to your advantage to make sure you're not paying more than you need to in order to do that you want to make sure the dividends you receive are what's called qualified dividends which means they originate from a us-based company and in return for holding onto those investments for more than 60 days those dividends are taxed at the long-term capital gains rate which could be nothing if you earn under 40 000 a year being single or 80 000 a year if you're married then for anybody earning more than that amount your qualified dividends will be taxed at the low rate of just 15 and then anything above that is taxed to 20 plus state taxes california this is considerably cheaper than paying dividend taxes ordinary income which means you get to keep more money in your pocket each and every year this is very important to be made aware of because even though dividend payments could be very enticing upfront taxes could absolutely eat away at your profits if you're not careful and second the next approach to earning passive income with index funds is simply growth the way i see it this is the real reason to invest in index funds not so much the dividend sure the dividend payment is nice and it doesn't hurt but the real money is made here as the price of the index fund goes up in value over time an investment in something like a total stock market index fund is literally an investment that the entire economy will continue growing businesses will become more efficient other people will invest to become a part of it and historically those investments have gone up above eight percent a year in value even if we go back further than that in just the u.s in the last 100 years the s p 500 has seen a 10 annualized return with dividends reinvested and the best part about all of this is that you're not going to be taxed on this growth and profit until you decide to sell that means essentially your money gets to grow completely tax-free up until the point where you want to spend the principal at that point you're going to be taxed at the long-term capital gains rate which means you could strategically sell your investments at different times to make sure you're in the lowest tax bracket possible either way with these funds having grown an average of eight percent a year investing a thousand dollars is going to give you a free eighty dollars every single year on average and passive growth that you could later invest or spend but in terms of using all of this to make an extra 100 a day here's what you need to know if you just look at this objectively from the perspective of dividends it's not gonna look pretty because if you average a two percent dividend paid to you annually you will need one million eight hundred and fifty thousand dollars invested and then bam you'll make one hundred dollars a day in passive income with an index fund now something like this is not impossible and by investing 17 a day you should be able to achieve that within 40 years bump that up to 30 a day and you'll get there in 33 years and if you can invest 50 a day you'll get there in 27 years and we know that's probably not what you wanted to hear and you were expecting some sort of magic that could do that in uh well a few months but even though i can't do magic tricks thankfully there is a bit of a shortcut that everybody could use and that's what's known as the four percent rule this is the basic early retirement principle sometimes known as the trinity study which suggests that you could spend four percent of your portfolio every single year without running out of money that's because as your portfolio grows an average of eight percent data shows that you could safely spend half of that while leaving the rest to continue working on your behalf so that you'll have more money to spend the next year it's no different than growing out a rose garden large enough to give you a brand new bouquet of flowers every single month without running out except instead of roses it's flat out money in this case now assuming that you could periodically sell four percent of your portfolio every single year as passive income you could achieve your goal of a hundred dollars a day by investing nine hundred and twenty thousand dollars in a broad index fund throughout the entire market now i realize that's a pretty significant number that most people would not be able to accumulate in a matter of months or even years but if you break it down and let it become a daily habit as simple as brushing your teeth here's how attainable it could really be just like our last example investing 10 a day is going to get you there in 38 years it's a long time i know but investing 10 a day is something that almost anybody could do on autopilot without a second thought and by the time you're about to retire you would have hit that goal with almost no effort whatsoever however if you're willing to invest more you could speed up the process dramatically at 20 a day you could reach that goal in 30 years with 30 a day it's 25 years at 50 a day it's 20 years and if you could swing a hundred dollars a day you're literally 13 years away from making that a reality and everything else after that is purely passive unfortunately i would say this is the biggest reason holding people back it's not necessarily the work because once you set this up with a brokerage and enable auto invest you're pretty much done in 20 minutes but it is the impatience of staring down the barrel of another 20 years and thinking eh this is too long i'll do something else instead that is why so many people don't even try but i will say this it's kind of like going to the gym and that once you start you're not going to want to stop i've never met someone earning even five dollars a day passively who isn't thoroughly excited with the aspect of passive income and earning money without having to lift a finger every single time once you see the momentum beginning to work in your favor you're gonna be absolutely obsessed with it like i am and then you'll find every way imaginable to invest even more because it's fun or it could just be my weird idea of fun but probably not because you're literally watching a 15 minute video about passive index fund investing so uh who's the weird one now i will say this in terms of which index funds i personally like here's the list the easiest from all of them would simply just be a broad stock market index fund like vt sacks or fizzrocks and that's it this covers the entire u.s stock market and i would say for most investors this could be all you need with this you get the diversification across thousands of different companies it doesn't matter if a few of them don't go open price it's done really well historically and it's really simple because it's almost a one fund fits all type approach beyond that since i like taking a bit more of the yellow approach you also have the s p 500 index fund like v phi x or physics 6 that covers you guessed it the s p 500. now this one is slightly riskier because you're taking everything within the entire market and then condensing it down into just the top 500 companies in the us but you can't argue with the fact that so far this top 500 companies have done really really well who knows if that's going to continue over the next 50 years but for me i'm fine taking that risk and betting that the entire u.s economy will continue to grow and expand and this could be a good option for anybody who wants to be a part of that there's also other options that you could add on with this like an international index fund that covers the entire market outside of the u.s examples could include victor six or fispy six now here's the thing over the last 10 years international index funds like this have remained fairly flat and as of now the u.s market is on a roll outperforming just about every other market out there but always remember that is never guaranteed to happen throughout history there have been multiple times where international index funds have outperformed the united states like throughout the 1980s and 2000s and there's certainly the chance of that happening again plus even if it doesn't outperform the united states at least in the meantime you're getting paid a slightly higher dividend i personally would not go 100 into this but i think at 15 to 20 percent it couldn't hurt and finally you could throw some others into the mix as well like with real estate you got vnq if you want tech there's vgt and even though i'm listing off vanguard funds here the truth is pretty much any fund will work depending on which brokerage you're with between all of these you should be able to get the ultimate diversification across the entire market and be that much closer to your goal of 100 a day just set up these investments on autopilot preferably in a retirement account contribute as much as you can and then just wait for it to turn into a money tree like i said this is not meant to be something that happens overnight or even in the next few years but for something that anyone could start working towards almost immediately regardless of how much money time skill or effort they want to put in this is absolutely one of my favorite easiest ways of making truly passive income without ever needing to lift a finger or make an only fans account oh and one last thing if you enjoyed this video and find it helpful just do me a huge favor and either subscribe or hit the like button because it does truly make a big difference and if you're feeling truly adventurous i've spent the last year creating a stock market app that tracks the market with the daily newsletter this is something we put a lot of work into and we're about to expand on so many new features in the coming few months so if you want to be a part of it let me know what you think the link is down below in the description it's called the hungry bull that's it so with that said you guys thank you so much for watching feel free to add me on instagram or my second channel the gram stefan show i post there every single day i'm not posting here so if you want to see a brand new video for me every single day make sure to add yourself to that and lastly if you want a free stock that's now worth all the way up to a thousand dollars use the link down below in the description and sign up for public using the code gram plus i'm posting everything i am buying on there so if you want to be a part of it the link is down below in the description thank you so much for watching and until next time

Channel: Graham Stephan

Views: 783,404

Keywords: investing, investing for beginners, investing in your 20s, how to invest, how to invest in real estate, how to invest in stocks, stock market investing, stock market investing for beginners, stock options, robinhood, robinhood app, best stock trading app, how to be a millionaire, how to be a millionaire in 3 years, credit score, credit score explained, credit card, credit cards for beginners, passive income, how to build wealth, how to build wealth in your 20s, real estate 101

Id: Wf47FpKtuZY

Length: 15min 27sec (927 seconds)

Published: Wed Sep 22 2021