Savers are losers | How to INVEST $500 / month and retire a millionnaire 🤑

hey guys welcome back to the channel today's video is about something that's written in this particular book Robert Kiyosaki I you must have heard me say about this guy a lot about this book a lot and this book actually says there's a chapter that says Savers are losers he's actually not calling Savers as actual losers but what he means is that if you save your money you actually lose money to inflation we'll talk about that we'll talk about what to do to counter that how do we not lose money and how do we grow our money we'll talk about compounding we'll talk about which stocks to invest in we'll talk about what are the differences so this video will talk about end to end on why you should invest your money where to invest your money and in what circumstances saving still makes sense so let's get started [Music] foreign let's get started and I would start with my favorite cartoon as a kid that was Uncle Scrooge you know it was Scrooge McDuck and this guy had a castle full of money and I was always fascinated that you know it would be so cool to swim in a pool of money I was six or seven right so uh obviously you know I was very fascinated but now I believe that this guy was actually not doing the right thing and we should not be him we should be someone whose money is actually logged into assets we should be someone whose money should be logged into Investments and yes we should have an emergency fund but we should not have a castle full of money because that way we'll actually induce to inflation I'm sure this guy did not know it but in this video we'll understand how in real world not in cartoons but in real world you actually lose money if you have a castle full of it and I'm not the only one who says we need to stop money we know Warren Buffet whose net worth is over 100 billion dollars and he keeps saying that we should not be saving money and we should be investing money and I talked about Robert Kiyosaki who always says that you should not be saving money he also says a lot of things that I don't really agree to but this is something that I definitely agree and we'll prove it with numbers so the question is why should we not save money so this is basically me um without the eyes for some reason so I have hundred dollars and I go to the bank and I save those hundred dollars in the bank the bank at Best in Canada at least gives me one percent interest rate that's the best interest rate usually the bank gives way less than one percent but let's assume that they give us one give me one percent on the hundred dollars and I make 101 so the hundred dollars increased by one dollar increase 201 now I go to grocery this year now next year it's 101 dollars but this year I take the hundred dollars and I buy a hundred dollars of grocery now because the inflation is so high it's at eight percent this is the government estimate grocery is actually growing at 10 so now when I go to the store next year I actually spend 10 more and the same grocery that I bought for 100 now cost me 110 so what's happened is that the bank has only given me one dollar but I lost ten dollars of buying power on that same grocery that I bought for 100 and this is what inflation is and this is really really crazy imagine if you saved 500 per month for 30 years at a 30-year average inflation of 2.47 your 180 000 will be worth 30 percent less so whatever you buy for 180 000 today you will be able to buy a lot less for the same hundred and eighty thousand dollars and that actually translates to at least 30 reduction and what's happening is that you have been saving all this while into your bank account you have been getting next to nothing from the bank while the bank has been investing that money and growing on top of your money and you have been losing buying power to inflation so what do we do the answer is that we invest our money so the next question is where do we invest our money you can do it in ETFs which are exchange traded funds you can do it in mutual funds I don't really like mutual funds because the fees are very high so ETS is a better option we have individual stocks you can buy a McDonald's here you can buy a Tesla share and that's up to you and your research we'll talk about that a little bit here we we can invest in real estate which actually grows a lot and I'll be talking a lot on this channel we can invest in crypto that's something also that I'll be talking in the future videos and then you can also invest into gold and bonds that is a hedge against inflation and we'll be talking about this as well in the upcoming videos but I for now only do in the four things ETS individual stocks real estate and crypto now this can be very very confusing which place to invest how much to invest but I'm going to make it very simple and let's assume that you invest all your money whatever you have every month whether it's 500 one thousand dollars two thousand dollars you invest into one ETF which invests into S P 500 this is basically the top 500 companies in the US and you invest into an ETF that invests into these 500 companies and let's see what happens and to understand this let's go to an Excel now guys to understand this I am not going to take hypothetical numbers what I'll do is I'll actually go back to history back in 1992 which is 30 years from now I'm going to look at the S P 500 Index at that time and if you invested 500 every single month from 1992 to 2022 what would be the returns that you will get and will you be able to beat inflation or not now understand that there were a couple of downturns in fact three downturns that you have in these 30 years it actually includes all of that and we'll see what returns we get whether the market is up or down if you invest 500 every single month so let's assume that you started investing in Jan of 1992 and the share price of this S P 500 which is so what I've taken here is spdr which is spider this is the S P 500 that has been there for the last 30 years I will talk about the index that I actually invest in right now I'm not doing it in spdr I'm actually doing it in vo and I'll talk about that later as well but let's assume that you are investing in spider for the last 30 years starting January 1992 where the share price was close to 25 you invested 500 you got about 20 shares and you might say that how can I buy fractional shares you could not do that in 1992 but you can do it today using well simple I'll talk about that in a later slide and you keep investing 500 every single month whether the share is up or down if the share is up you will get less shares you if the share is down you'll get more shares but every single month on first of every month you keep keep investing 500 and because you have been investing every single month 500 without taking the money out this actually grows to 1.1 million dollars you only invested 180 000 which could have been 125 000 if you're sitting in the bank account but now it's worth 1.1 million dollars now you might see that how is this money growing so much and the reason why it grows so much is the power of compounding if you put hundred dollars today into the S P 500 and it grows by seven percent you gain seven dollars now in the second year if the S P 500 Grows by another seven percent you will act actually make money on the hundred dollars that you invested initially the additional hundred dollars that you invest in the second year and the Seven dollar appreciation that you got in the first year so that way the money is actually compounding now this is something that we actually read in our mathematics books in sixth seventh eighth when we were discussing compound interest rate but unfortunately it was never applied to personal finance now we are doing that but that's actually not all because S P 500 also gives a dividend on average it has given 1.45 demand and what I've done is if you get a 1.45 dividend end of every port every single year you actually reinvest whatever dividend you get back into S P 500 and if you do that your overall return over the next 30 Years by reinvesting the dividends will be about 1.44 million so if you invested 500 a month for 30 years like we saw in the S P 500 the total money invested will be 180 000 net worth in 2022 will be 1.1 million dollars and this is a 6.2 cogr cagr is basically compounded growth so that's more or less you know how much the money has grown every single year it's not a massive growth but if you invest back the 1.45 dividend whenever you get it you will make 1.44 million so if you invested for the last 30 years starting 1992 to 2022 your portfolio will be worth 1.44 million and that's 7.2 percent cha now you might say that 7.2 percent growth is not enough and that's true but it's still more than if you had saved the money in the bank account which would give negligible returns however if you are an active investor and if you can identify companies that can actually grow much faster than S P 500 good for you but it requires a lot of research so for instance if we were to invest the same 180 000 same 500 every month into McDonald's share instead of s p 500 that same 180 000 will be worth two point 0.6 million so it will be an entire 1 billion more the CHR will be 8.6 and if you invest back the two percent dividend that McDonald's has given over the last 30 years every single time you reinvest that into the McDonald's share your net worth today will be three million dollars that's over 10 cagr and that's amazing but the problem with this is that you require a lot of research companies can actually shut down 30 years is a long time McDonald's Coca-Cola Johnson and Johnson all these are big companies that have stayed for a long time but it's very difficult to understand what's gonna happen in the next 30 Years so for me personally I would not invest a lot of my money into stocks because it requires a lot of active investing and I'm not a very active investor so I personally am okay with the S P 500 which gives me decent return that not only beats inflation but also puts me ahead on the investing game so we talked about this chart where your 180 000 which is 500 per month if you save in your bank account that would be worth 30 less but if you invest that hundred and eighty thousand dollars into S P 500 for the next 30 Years you will see that the chart will grow to 1.44 million dollars these are real numbers from 1992 to today so you can't really say that this has not happened this is real numbers including all the downturns you'll see all these downturns and I'll talk about that in a bit so you're actually making 700 return on your money which is much better than saving the money in the bank account now obviously if you put in more you'll actually get more so if you put 500 a month you'll get 1.4 million if you put 1 000 a month for the next 30 Years you get 2.9 Million if you put two thousand dollars a month you get 5.8 million and so on and so forth so now we understand that we need to invest our money because that's much much much better than saving the money in the bank account because we do not lose money if we do that but how much to invest is the question and the answer to that in my view is it should be in 20 of net household income it should be as close as possible to that and I personally do that using doing well simple trade I talked about that because I can buy fractional shares as well so it helps me invest the same amount every single month so that's one advantage that I have plus it's a very very trusted platform so I would use very simple for stock and ETF investing and a lot of people also ask that where should I invest whether it should be tfsa rrsp or personal account I would recommend that you should start with tfsa you should Max it out six thousand dollars per year if your employer is matching then you should max out your rrsp as well whatever the employer is putting you should put that because that's free money and then whatever is left of that 20 you should put into your non-registered which is your personal trading account all can be made within wealth simple and that's pretty easy to do now I've actually made a calculator where it will actually calculate what your household income is after tax and how much you should invest and what would it give you after 30 years so what I've done here is that I've used the same projection that we have from 1992 to 222 and I've replicated that so I'm I've assumed that the market will behave the same starting now as it did from 1992 to 2022 now I know it's not a fair assumption but it's still a long enough time frame to take so let's assume the market will behave the same way and what would happen is instead of investing into spdr and I'll tell you why now the only difference here is that I have taken the last 30 years on spdr which is also an ETF that invests in S P 500 but the management fee of spdr is pretty high so therefore I will recommend doing it in vo where the management fee is much much slower so let's talk about this calculator it's a very simple calculator for instance you are earning five thousand dollars household income after taxes and if you invest 20 that's one thousand dollars if you invest one thousand dollars every single month and if you're getting a three percent hike every single year you will be investing 570 000 over the next 30 years and that 570 000 will translate into almost 3.8 million dollars that guys is a lot of money if you're earning five thousand dollars and if you're getting a three percent raise every single year and if you invest 20 for the next 30 Years reinvesting all the dividends that you're getting into one stock it's as simple it's one stock you can actually make a ton of money by the end of 30 years it's as simple as that and it's based on real hard numbers from 1992 to 2022. now you can obviously play around with this number you can say that you know you are earning ten thousand dollars you invest button you can actually do okay I'll invest 20 10 I get a five percent raise so you can play whatever way you want to play with this so you can download this calculator from the description below I'll put in a link and it's the same calculator that I use for budgeting as well it's just a different tab so just download if you have not done that already now let's also talk about the elephant in the room which is what happens if the market crashes for example we are seeing the market kind of crash right now it's expected to crash in 2023 it did crash in 2008 it did crash in 2000 when the.com bubble happened the market crashes are very very usual it happens usually in eight to ten years and it's due for a crash right now as well so what happens if the market crashes there's a lot of anxiety in people when they see their stocks go down but let me show again with hard numbers that it does not matter so what I've done here is I've put the stock price every single year in the beginning of every single year and you can see that every single year it grows by a little then it grew by a lot in 1996 it grew kept growing you know till 2010 we had the.com bubble and the stock price actually declined from 97 per share to 62 dollars a share so it was a continuous three years of decline but the good thing there is that whenever there's a decline the stock price reduces and now you are able to invest into more number of shares because you are investing the same 500 that 500 actually buys you more shares and that's what happened here so you were investing 200 something shares then the market price increased obviously the same 500 or same six thousand dollars for the entire year 500 per month into twelve six thousand dollars for the entire year what you only 62 shares but the moment market crash you were now able to buy more shares in 2003 you were able to buy for the same price 96 shares and again the market started going up and again in 2008 we had the subprime crisis and again the market crashed by about 32 percent and again you were able to buy more shares then and then the market started going up then there was a mini crash in 2016 you were able to buy kind of the same shares and it went on and on now I've also taken a projection of 2023 I don't know how we'll end 2023 or how we'll start 20043 whether there will be a crash or not and if there is a crash that happens and even if we reach 2021 levels of 2020 levels we again will be able to buy three more shares so that's what happens when there's a crash for the same amount of money you can actually buy more and when the market goes back up those additional shares also add up to the growth and they compound together so it does not matter we have had two major crashes in the last 30 years and even if we have two to three major crashes in the next 30 Years you will still be ahead on the investing game but there are three caveats to this three rules to this number one is we need to invest into growth and dividend ETFs I would definitely do that we need to invest in Blue Chip stocks we should not be investing this money into something that's not proven because that can actually go down to zero and then your investments will actually not grow by seven to ten percent that you are expecting number two rules that I follow is we need to invest every single month consistently and number three is we need to invest for long term we should not be shorting shares we should not be taking that money out at least I don't do that I would keep investing five hundred one thousand two thousand dollars whatever I want to for the next 30 years and that would give me a massive return When I retire now we need to also discuss when is it okay to save there are two instances when saving is actually good and number one is when you're saving for an emergency fund that's four to six months of your expenses that's very important because you can lose your job you can have an emergency trip to India and then you will not have to max out your credit cards you can actually pull money out of your emergency fund and this emergency fund I actually keep in a bank account it's fine if it's not giving me a lot of returns I try to find the best possible place to keep it right now I'm getting about 1 point five to two percent return in a GIC but that's okay I'll just keep putting more money a little by little every single year to keep with inflation but it's very important to have an emergency fund and it's okay to save for that and then start in which investing once this is filled up and then if you are saving for a house do not invest that money and the reason for that is we don't know what's going to happen next year if your Investments actually go down it's very difficult to pull those out in a loss and then invest into a house so if you are saving for a house do not put into tfsas and ETFs and all these things because then there's a very high chance that you will sell it at a loss when you are buying a house apart from these two reasons there's absolutely no reason why you should save your money and we prove that with time with actual numbers that there is a risk-free way of growing your money and not losing it to inflation I'll end this with a quote from Warren Buffet he says that the stock market is a device for transferring money from inpatient to the patient that basically means that people who shot shares people who sell out of fear they're the ones who actually lose and people who buy when people are fearful are the ones who win in the market so it's a transfer of wealth from people who are impatient to Patient you need to patiently invest into this market for the next 30 years if you have to build wealth by the time you retire that's all I have for today I hope you like this video do hit the like button and do subscribe to the channel if you have not done that do hit the Bell icon as well and do share this video with anyone who you feel would benefit from it [Music]

Channel: Grow with Nav

Views: 3,071

Keywords: investing for beginners, stock market, how to invest, savers are losers, savers are losers robert kiyosaki, whiteboard finance stock market beginners, how to invest in stock market, becoming a millionnaire, how to earn money, warren buffett money tips, robert kiyosaki interview, minority mindset dividend, dividend investing, compound interest investment, stock market crash 2022, investing in market crash, money mindset, growwithnav, millionaire mindset, savers are losers 2022

Id: 9BPA-qs1yRs

Length: 19min 12sec (1152 seconds)

Published: Tue Aug 09 2022