Investing For Beginners - How I Make $17K per Week from Stocks

Summary

The video script narrates the story of Mervin Tilbury, who, despite hard work, never achieved financial freedom due to poor financial choices. The speaker contrasts this with their own successful investment journey, emphasizing the importance of investing to beat inflation. They explain the basics of stock market investing, the power of compound interest, and the benefits of index funds. The script offers practical advice on when and how to start investing, the importance of diversification, and the minimal risk associated with a long-term, well-thought-out investment strategy.

Takeaways

• 💼 The speaker's father, Mervin Tilbury, worked hard in a factory and had side jobs to provide for his family, but his money-saving method in a shoebox led to a loss of value due to inflation.
• 📈 The fear of money losing value to inflation motivated the speaker to invest throughout life, resulting in significant growth, with investments growing by around $17,000 a week.
• 💰 To make money, one must first beat inflation, which averages a 3.8% annual rate over the last 60 years. Without growth beyond this rate, one is effectively getting poorer.
• 🏦 Savings accounts typically do not offer returns high enough to beat inflation, so investing in the stock market is suggested as a way to achieve higher returns.
• 🔑 Stocks can offer two forms of returns: capital gains when the stock price increases and dividends, which are regular payments to shareholders.
• 🌱 The power of compound interest can turn a modest investment into a significant sum over time, especially when invested in stocks that grow at an average rate of 10% per year.
• 🕒 The importance of starting to invest as early as possible is emphasized, as it gives investments more time to grow and compound.
• 💳 Before investing, it's crucial to pay off high-interest debt and build an emergency fund to avoid having to sell stocks during emergencies.
• 📊 The speaker suggests a 70/20/10 rule for financial allocation: 70% for living expenses, 20% for investments, and 10% for enjoyment and fun activities.
• 📱 Investing apps can facilitate the purchase of stocks and fractional shares, allowing for smaller initial investments and broader market exposure.
• 📊 Two main methods for predicting stock market movements are technical and fundamental analysis, with the speaker favoring the latter for long-term investment decisions.
• 🌐 Index funds are recommended as a low-effort way to invest in a broad market, with the potential for higher returns than actively managed funds and lower fees due to passive management.

Q & A

What was Mervin Tilbury's occupation and how did he support his family?

Mervin Tilbury worked in a factory job making cable ties and had a side hustle cutting grass to provide for his family, which included his wife and three daughters.

Why did Mervin consider his son's uncle's investment in the stock market as a risky move?

Mervin viewed the stock market as an extremely risky investment because he was unaware of the risk he was taking by not investing his money wisely and letting it lose value due to inflation.

How did the narrator's father's approach to saving money affect his financial situation over time?

The father's approach to saving money by stashing it in a shoebox and not investing it led to a decrease in the money's value due to inflation, which prevented him from being able to quit his job at the factory.

What is the average rate of inflation over the last 60 years mentioned in the script?

The average rate of inflation over the last 60 years is stated to be 3.8% per year.

What is the concept of compound interest as described in the script?

Compound interest is the process where the interest earned on an investment is reinvested, thus earning interest on the initial investment as well as the accumulated interest. This leads to exponential growth over time.

How much money would one have after investing $250 per month for 42 years at an 8% annual return, according to the script?

According to the script, investing $250 per month for 42 years at an 8% annual return would result in becoming a millionaire.

What is the recommended approach to managing high-interest debt and building an emergency fund before starting to invest?

The recommended approach is to first pay off all high-interest debt, such as credit card debt, and then build an emergency fund that covers three to six months of living expenses to avoid having to sell stocks during emergencies.

What is the 70/20/10 rule mentioned in the script and how does it apply to personal finance?

The 70/20/10 rule suggests allocating 70% of one's income for living expenses, 20% for investments, and 10% for fun or discretionary spending. This rule helps balance life's necessities, wealth growth, and enjoyment.

What are the two main ways to attempt to predict the stock market as mentioned in the script?

The two main ways to attempt to predict the stock market are technical analysis, which focuses on charts and patterns, and fundamental analysis, which looks at a company's financials, leadership, and brand recognition.

What is an index fund and how does it work?

An index fund is a type of investment that tracks a specific market index, such as the S&P 500. It allows investors to invest in a broad market or a segment of it with a single purchase, providing diversification and reducing the risk of investing in individual stocks.

How does the script suggest dealing with the risk associated with investing in the stock market?

The script suggests that the risk associated with investing can be managed by having a diversified portfolio of index funds, investing gradually over time, and being prepared for market crashes by possibly including bonds in the portfolio mix.

What are the three good reasons to sell investments according to the script for someone in their twenties to thirties?

The three good reasons to sell investments for someone in their twenties to thirties are: needing money for an emergency, recognizing a bad investment that is consistently underperforming, and achieving a specific financial goal that requires liquidation of the investment.