How to Start Investing for Beginners | Tips For Your 20’s

[Music] hi hello how's it going my name's elena and welcome to my channel i don't see a whole lot of young people especially women talking about finances and i think it's such an important topic to be able to become financially independent free and empowered i was a business major in university and so i have a little bit of experience from that as well as just research i've done on my own this video is really fun for me because i honestly probably put like 25 hours of research into this to make sure i'm sharing helpful information so i went to a bunch of experts gathered tidbits from them and wanted to make it in one concise nicely packaged video to share some basic information for you this has been a fun process for me because i've learned alongside you and i'm going to share some of my personal experience as well so if you have little to no knowledge about investing but you want to learn more and you want to learn how to invest your money then this video is for you i'm also going to include some other great resources in the description below to learn from if you want to dive further which i highly recommend i'm going to talk through some terms for those of you that maybe don't really have any knowledge of finances or financial terminology and then kind of go through some different steps as well as some great ways to start investing your money today also stay tuned for later i'm going to be talking about stocks and that section video is sponsored by robinhood which is a platform i am a big fan of coming up soon as well as talking about some other ways to invest your money so before you considering investing you need to kind of take a look at your finances and i highly recommend trying to follow these steps first and foremost it's very important to have an emergency fund i talked about this in one of my other financial videos but this is just a great rule of thumb you never know what's gonna happen i mean we're literally living through a pandemic if that doesn't show to you enough that you never know what's gonna happen if you need emergency savings in case you lose your job or something just look at the news across the board it's recommended that you least have a month of money in your savings for an emergency and then to slowly grow that to three months to six months the second step is to pay off debt it's very important to eliminate debt as soon as you can because that's going to set you back in the long term and with any high interest rate debt you want to get rid of that before you start making any big investments because that's just money that's gonna keep going down the drain if you don't address it the third is to open a retirement account and i think i'm gonna make a whole separate video on this again as i've talked about the past i am a passionate advocate of starting your retirement as soon as possible i personally started mine when i was 19 i opened a target retirement fund account through vanguard so basically there's different types of retirement accounts some of the most popular ones are 401ks and roth iras so a 401k is generally set up through your workplace so if you're working a nine to five or some other type of job with benefits there's a chance you have a 401k retirement account so a 401k in itself is an account that holds investments so if you're a 401k through your job you're investing you're doing great you're preparing for your future i'm proud of you so a 401k is a tax advantaged retirement account where you put money in and your company is going to most likely match to a certain percentage how much money you put in through this you're automatically being invested in a mixture of stocks and bonds through mutual funds which we will break down in just a second there's also roth ira accounts which is another retirement savings account that allows your money to grow tax-free [Music] so let's break down a little bit of those terms so if you're unfamiliar with what stocks bonds the stock market is let's talk about it i'm going to try to make it as simple as possible so a stock is an investment that represents a share and a company so let's take facebook for example you can buy a stock of facebook which means you basically own a little piece of facebook's big old pie and so as that company grows your stock is going to grow slowly with facebook the stock market that you always hear people freaking out about is the marketplace for stocks and where stocks are held so it shows all the different shares of company ownership and how they're performing overall the interesting thing about the stock market is that it's generally controlled by investors emotions so people are starting to freak out because let's say there's a pandemic they're going to want to pull their money out and sell those stocks and shares and if a bunch of people do that at once that's going to cause it to drop but then as soon as they're starting to feel like okay you know this is good i'm going to reinvest my money in the stock market the stock market's going to go back up you often hear people talking about investing with risk versus reward so you're going to have to risk more if you want a higher reward and want to try to get more money but there's also a lower risk investments which means you're going to have a smaller reward profit margin so you're going to make less but you're risking less as well so a bond is something that falls in that kind of low risk category a bond is a contract with a company or the government we're essentially loaning them your money and so it's very predictable and over a long period of time with that loan you're gonna make a little bit of money off of it so it's considered a low risk investment funds is basically a big old bowl of stocks and bonds etc so i was watching a video and someone explained it buying a stock is like buying one single flower but buying a fund is like buying the whole damn bouquet with all the bunch of different flowers so there's different kinds of funds and the ones i'm going to be talking about primarily today are index funds and mutual funds so mutual funds came along first and like i said earlier a fund is a big old bowl or bouquet of stocks and bonds and it's managed by an investor so some very smart guy or girl who understands the stock market is managing a fund or mutual fund and they using their brain and their knowledge of the market is selecting which stocks bonds etc they think are going to be the best investments to include in the bouquet so basically you're owning a bunch of stocks in one package so there's more diversification because if you're to invest in one stock let's say you buy a whole bunch of facebook and facebook just plummets all your money is gonna go down with facebook that's why it's very popular to hear that you need to diversify your portfolio basically don't put all your eggs in one basket mutual funds came along for that reason to be able to invest in stocks but to diversify across a larger like platform these are run like i said by some smart man or woman and they are gonna charge a big old fee maybe like one or two percent of your mutual funds so however much money you're putting in there you're paying them a little bit later along came index funds now i'm a big old fan of index fund so is warren buffett may i add one of the most successful investors in the world if you don't trust me trust warren buffett he knows what he's doing similarly an index fund is a portfolio of certain investments that you can buy into and then you own a little baby share of a whole bunch of different stocks and companies index is a representative sample of the stock market so it's similar to a mutual fund but instead of being run by some like fancy manager it's passively managed by a formula so instead of like a mutual fund where you're trying to beat the market you're basically trying to match the market so big difference is that you don't have that mutual fund manager so you're gonna cut out a whole lot of costs so index fund is something that you usually invest in you're gonna sit on for a while and not touch it one thing to keep in mind is all index funds are mutual funds but not all mutual funds are index funds it's kind of confusing i know basically the way this grows is through compounding interest which is basically reinvesting your interest into your initial loan or investment on mutual funds there's no interest paid but you might have dividends or capital gains reinvested to compound over time so looking at investor.gov here here's a compounding interest calculator to get an idea of how this would work let's say you put a thousand dollars in index fund let's say you put like a hundred dollars a month length of time let's say 30 years say we're gonna put out a hopeful eight percent and calculate annually look at this number you originally put in just 37 000 of your own cash and because of compounding interest it grows to 146 000 in 30 years so imagine if you were to put in a higher number of an initial investment more money each month or to do an account that has a bit of a higher annual rate of return [Music] okay so now you know a little bit more term so we can dive into some of the best ways to invest like i said earlier putting money into an entire recount is a great way of investing highly recommend it the sooner you start the better retirement accounts like a roth ira you max out i believe it's around six thousand dollars is the max you can put in a year so let's just say you make a ton of money one year and you want to invest a lot of it you're a little bit limited when it comes to that retirement account but even if you don't have that much money to put into investment which i'm sure is quite a few of you guys don't worry just put in a little bit every single month and it will pay off so now you know make sure you have emergency savings pay off any big old debt that you have invest in your retirement let's talk about some different ways to invest so when it comes to investing like i mentioned earlier there's different approaches you might want to be more high risk high reward that could be somebody that's trading in stocks and is much more hands-on and then there's also a more passive a little bit lower risk approach like investing in an index fund so there's different types of index funds you may have heard of like the s p 500 that's a super popular one so what is the s p 500 then so glad you asked so the s p 500 index basically tracks the top 500 u.s companies if you're in a different country it's going to be different for you some of these basic principles hopefully apply to you so there's slightly different s p 500 funds depending on the brokerage account that you sign up with i personally signed up with vanguard which is a very popular one the vanguard is the originator of the index fund but there's many other options to choose from like charles swab or fidelity make sure to do your own research everything in this video you gotta check it out for yourself i am by no means telling you what to do i'm here to provide information for you to further learn for yourself so i personally have been investing with vanguard for quite some time they don't have the best interface it's kind of confusing to use they're a really good place to invest because they have very low expense ratios so that means if i want to invest in an index fund i only have to pay them a very small percentage like point zero four percent so here's a story that i love that gives a little bit more credit to the s p 500 warren buffett basically bet a million dollars that an index fund would outperform a collection of hedge funds over 10 years a decade passed and he won so all these different hedge funds trying to beat the market trying to time it trying to see when the stocks are going to go up and down to make the most amount of money they didn't win putting your money in an index fund and just letting it chill and slowly ride the wave of the stock market did the best and you don't have to know a whole lot you just put your money into one and you sit back and you don't touch it and you let it ride the weight so the s p 500 tracks the top 500 companies and so it lets you sprinkle your little investments across the top 500 but a total stock market fund is gonna let you sprinkle all the way to the top of the big companies but also to little companies so that is a brief overview of index funds these come highly recommended any decision you make you have to make for yourself put in the time and research just your finances make sure you're learning for yourself the goal of them is not to just put money in and then take it out in six months and hope it's grown a lot it's about putting in for years if not decades and letting it grow over time and then take it out when you're ready to buy a house or you're ready to retire the best time to invest was yesterday i kept hearing that in my research and i'm like it's true you got to put that money in as soon as possible you put the money in consistently you don't touch it don't even really look at it and just let it grow trying to time the market is very hard and honestly don't trust yourself so it's about putting in a little bit of money each month and like i said just don't touch it so now let's talk about stocks a little bit more and a potential for higher risk high reward so you probably have heard of people talking about investing in this stock or that stock or whatever that may be and making money and being lucky because they invested in apple the right time or something like that so that's when stocks into come into play they are a riskier investment but you're able to make potentially a lot more it's harder to do and it's going to take time to learn but there can be really incredible payoffs the nice part is that socks in general do trend upwards there's gonna be dips and it's gonna probably rise two thirds of the time and then like drop a third of the time so you basically gotta stick with it so if you wanna get a little bit more specific there are some apps that are out there that are really great that let you invest a small amount of money from anywhere so you get a really good feel of the stock market and kind of learn what you're doing and get more comfortable with it like i said index funds are great for a lot of people out there but if you are willing to take the time and you really want to learn well then give individual stocks a try so robin are just sponsoring this part of the video specifically which i'm excited about i've been a fan of their services i've had quite a few family and friends refer me to robin hood and i've dabbled with it a little bit to learn more about how to buy individual stocks of course as with everything in this video look it up for yourself make your own financial decisions so one of the best selling points that i've heard time and time again is just that the interface is so clean and easy to use and great for beginners so the cost of certain stocks can be really intimidating but like amazon is close to 3 000 tesla's close to like 1 5 452 which is a lot you invest in stocks options etfs right from your phone you're gonna earn interest on uninvested cash there's no commission fees or account minimum so whether you are new to investing and ready to learn or you just want an easier interface experience i highly recommend you check out robinhood i've leaved in the description below there's millions of users on there and when you sign up you get a free stock so go to this url and sign up to claim your free stock today all right so that was my basics 101 beginner's guide to investing and how to invest if you have more financial questions that you'd like me to make a video about feel free to leave a comment below if you enjoyed this video please like and subscribe that really helps me out and this video took a lot of time and i hope this information was helpful and as usual thanks so much for watching until next time [Music] you

Channel: Elena Taber

Views: 537,160

Rating: 4.970829 out of 5

Keywords: how to invest, money tips, saving, how to budget, how to save, how to start your retirement, investing tips, money tips for women, financial freedom, get rich, roth ira, robinhood

Id: u4Adtp04JxI

Length: 14min 18sec (858 seconds)

Published: Tue Oct 13 2020