If I Started Investing In 2025, This Is What I Would Do

Summary

This video guide walks beginners through the basics of stock investing, covering how to buy and sell stocks, the importance of long-term holding, and strategies for managing emotions during market volatility. It highlights the benefits of holding investments through market ups and downs and recommends index funds like SPLG, VUG, and SCHD for long-term growth. Additionally, the video explains tax implications of investing and how holding stocks for over a year can lower taxes. The key takeaway is that staying invested and avoiding short-term panic can lead to significant long-term wealth growth.

Takeaways

• 😀 Learn how to buy your first share of stock by using a trading platform and placing a market or limit order.
• 😀 🏦 After purchasing stock, focus on holding it for the long term (more than 3 years) to avoid emotional decisions like panic selling.
• 😀 💸 Panic selling, driven by short-term market drops, is one of the biggest mistakes investors make and often leads to financial losses.
• 😀 📈 A historical example with SPY (S&P 500 ETF) demonstrates that long-term investments recover from market crashes and grow over time.
• 😀 🔄 Staying invested through market ups and downs, without reacting emotionally, typically leads to better returns than trying to time the market.
• 😀 🧐 Data shows that missing just the 10 best market days could lead to a 66% reduction in potential gains.
• 😀 🚀 Long-term investing (holding for years) is more successful than short-term trading or attempting to time the market.
• 😀 💼 Three recommended index funds: SPLG (S&P 500 ETF) for stability, VUG (Vanguard Growth ETF) for growth, and SCHD (Schwab Dividend ETF) for passive income.
• 😀 🏠 Index funds are ideal for beginners due to their low expense ratios and diversified exposure to large, well-established companies.
• 😀 💵 Understanding taxes on investments is crucial; capital gains taxes vary depending on whether you hold an investment for the short or long term.
• 😀 📊 Holding investments longer than a year typically results in a lower tax rate, which can reduce your overall tax liability on profits.

Q & A

How do you purchase your first stock using a brokerage account?

To purchase your first stock, log in to your brokerage account, navigate to the search bar, and find the stock you want to buy. Enter the quantity of shares, decide on the type of order (market or limit), and confirm the purchase.

What should you do if you want to sell a stock you've purchased?

To sell a stock, simply click on 'Trade' again, select 'Sell,' input the number of shares, choose between a market or limit order, and confirm the sale.

What is the recommended strategy for holding investments as a beginner?

For beginners, the best strategy is to hold investments for the long term, ideally more than 3 years, without frequently checking or reacting to short-term market fluctuations.

Why is panic selling considered a bad strategy?

Panic selling is bad because it often leads to selling at a loss during market downturns, preventing you from benefiting from long-term growth. Emotional decisions in investing can result in significant financial losses.

What is the historical example with SPY (S&P 500 ETF) used to demonstrate the importance of long-term investing?

The historical example shows that if you bought SPY in 2007 at $154 and held it through the 2008 financial crisis, despite a drop to around $73, the investment eventually recovered and grew, reaching $600 per share by 2025. This demonstrates how holding investments long-term can lead to significant gains despite short-term volatility.

How does long-term investing benefit investors compared to trying to time the market?

Long-term investing allows you to ride out market volatility and benefit from the general upward trend of the market over time. Trying to time the market often leads to missed opportunities, especially the best market days, which can result in lower overall returns.

What is the impact of missing the best market days on long-term returns?

Missing just 10 of the best market days can reduce your returns by 66%. This highlights the importance of staying invested rather than attempting to time the market.

What are some index funds recommended for long-term investing?

Three recommended index funds are SPLG (S&P 500 ETF), which offers a balance of stability and growth; VUG (Vanguard Growth ETF), which targets high-growth companies with higher risk; and SCHD (Schwab U.S. Dividend Equity ETF), which focuses on dividend-paying stocks, ideal for those seeking passive income.

How do taxes affect stock investments?

Taxes on stock investments are based on the profit or loss after selling the stock. If you sell at a profit, you'll be taxed on the gain. If you sell at a loss, you can use that loss to offset taxable income. The tax rate also depends on whether the stock was held short-term (less than a year) or long-term (more than a year).

What is the tax difference between short-term and long-term capital gains?

Short-term capital gains (for stocks held less than a year) are taxed at a higher rate than long-term capital gains, which apply to stocks held for over a year. Holding investments longer can reduce your tax burden.