How to Invest Your First £100: Investing for Beginners

Summary

In this informative video, the host emphasizes the importance of investing, even with small amounts like £1, and debunks the myth that investing is risky compared to the actual risk of losing money to inflation by keeping it in savings. The UK is highlighted as having one of the lowest rates of equity participation in Europe, with a significant amount of money sitting idle in low-yield savings accounts. The video aims to educate viewers on how to start investing, addressing common concerns like lack of knowledge and fear of loss. It provides a step-by-step guide on setting up an investment account with Trading 212, choosing between an ISA for tax benefits or a standard account, and selecting funds like Vanguard's World Fund to capture global market trends. The host also discusses the power of dividend reinvestment and the importance of long-term investment horizons, encouraging viewers to take the first step in their investment journey.

Takeaways

• 💡 Investing as little as £1 can be a starting point for building wealth over time.
• 🚫 The biggest risk with investing is not investing at all, as it exposes one to the risk of losing purchasing power due to inflation.
• 📉 Understanding and accepting market volatility is crucial for long-term investment success.
• 📈 Historically, the global stock market has provided an average annual return after inflation of 6.7%, which is a key trend to capture.
• 🌍 Investing in global funds, such as index funds and ETFs, can provide exposure to a broad market without the need to pick individual stocks.
• 💻 The process of investing has been simplified with online platforms, allowing anyone to start with minimal capital.
• 🇬🇧 The UK has a lower rate of equity participation compared to other European countries, indicating a need for better investment education.
• 💰 A significant portion of the UK's savings is in low-yield accounts, which do not keep pace with inflation, leading to a decline in real value.
• 📱 Apps like Trading 212 enable new investors to start with small amounts and offer resources to learn about investing.
• 🤝 Financial advisors often require a minimum investment threshold, which can be a barrier for new investors who lack guidance on how to grow their wealth.
• 📚 There is a call for regulators to provide free, informative content on the benefits of investing to educate the public and improve financial well-being.

Q & A

What is the single biggest risk mentioned in the transcript when it comes to investing?

The single biggest risk when it comes to investing is not investing at all.

Why is the UK considered to have a problem with investing?

The UK is considered to have a problem with investing because it has the worst investment participation in Europe, with a large amount of money sitting in cash savings instead of being invested in equities.

What is the average annual return after inflation that the global stock market has produced since 1950?

The global stock market has produced an average annual return after inflation of 6.7% since 1950.

What are the two main reasons people don't invest according to the HSBC study mentioned in the transcript?

The two main reasons people don't invest are that they don't know how and they are worried about losing their money.

What is the difference between speculation and investment as defined in the transcript?

Speculation is an effort, probably unsuccessful, to turn a little money into a lot, while investment is an effort which should be successful to prevent a lot of money from becoming a little.

What is the recommended minimum amount to start investing in the context of the transcript?

The recommended minimum amount to start investing is as little as a pound.

What is the name of the fund that the speaker uses in their portfolio and is an example in the transcript?

The fund that the speaker uses in their portfolio and is an example in the transcript is Vanguard's World Fund, denoted as VWL or VWP.

What is the significance of reinvesting dividends in an ISA?

Reinvesting dividends in an ISA allows for the purchase of more of the fund, which can lead to compound growth over time, and both the dividends and the growth in the price of the fund itself are sheltered from tax.

What is the importance of having a long-term perspective when investing?

Having a long-term perspective is important because investing involves market volatility, and it allows the investor to ride out market fluctuations and benefit from the long-term upward trend of the stock market.

Why does the speaker believe that regulators should provide free informative content on the benefits of investing?

The speaker believes that regulators should provide free informative content on the benefits of investing to educate the public, protect them from bad actors and schemes, and improve the financial well-being of the nation.

What is the speaker's view on the role of financial advice in helping people start investing?

The speaker is concerned that current regulatory requirements limit access to financial advice for those without significant funds, which can be a barrier to people learning how to invest and growing their wealth.

How does the speaker suggest one can get started with investing using the Trading 212 platform?

The speaker suggests downloading the Trading 212 app, opening an ISA or Invest account, depositing funds using the top options to avoid fees, and then choosing a fund to invest in, such as a global stock market fund.

Outlines

00:00

💰 Starting Your Investment Journey

The speaker begins by emphasizing the importance of investing, even with a small amount like one pound, and dispels the notion that investing is risky by arguing that the real risk is not investing at all. They discuss the UK's poor investment habits compared to other European countries and the tendency to keep money in low-yield savings accounts, which erodes purchasing power due to inflation. The speaker addresses common concerns such as a lack of knowledge and fear of loss, and they aim to provide practical steps for getting started with investing. They also touch on the misconceptions about the stock market and the importance of long-term investment for wealth protection and growth.

05:00

📈 Navigating the Investment Process

The speaker provides a step-by-step guide on how to start investing using the Trading 212 app, which they have been using for a couple of years. They explain the process of choosing an account type, with a preference for an ISA (Individual Savings Account) for new investors to take advantage of tax benefits. The sign-up process includes providing personal information, proof of identity, and a selfie for verification. The speaker discusses different methods for funding the account and highlights the importance of depositing at least £1 to trigger a free share offer. They also provide a guide on how to purchase a fund that tracks the global stock market, emphasizing that the video is for demonstration purposes only and not financial advice. The speaker shares their personal strategy of reinvesting dividends to grow the investment further and encourages viewers to start investing early to benefit from compound interest.

10:01

🤔 The Challenge of Financial Advice Accessibility

The speaker expresses frustration with the current financial advice industry, where qualified advisors often require a minimum investment threshold that many people cannot meet. They argue that this creates a barrier to entry for those who could benefit most from investing. The speaker calls for regulators to provide free, informative content on investing to educate the public and protect them from misinformation or fraudulent schemes. They advocate for financial education to improve the financial well-being of the nation, increase participation in work-based schemes, and reduce the burden on the pension system. The speaker concludes by offering to send out a t-shirt with an investment-related slogan to a viewer who comments on the video and encourages further discussion on the topic.

Keywords

💡Investing

Investing refers to the act of committing money, capital, or other resources into a venture with the expectation of gaining a profit. In the video, the speaker emphasizes the importance of investing as a means to grow wealth over time, contrasting it with the risk of not investing at all and the potential for cash savings to lose value due to inflation.

💡Compound Interest

Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. The video mentions compound interest as an important concept in investing, as it can significantly increase the value of an investment over time, which is a key reason why the speaker encourages starting to invest early.

💡Equities

Equities are shares of stock in a company and represent ownership in that company. The video discusses how the British public participates in equities at a lower rate than other European countries, which the speaker sees as a problem due to the potential benefits of equity investment.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video highlights the negative effects of inflation, explaining how cash savings can lose value over time due to inflation, which is why the speaker advocates for investing as a way to protect against this erosion of purchasing power.

💡Index Funds and ETFs

Index funds are a type of mutual fund with a portfolio constructed to match or track a specific index, such as the S&P 500. ETFs, or Exchange-Traded Funds, are similar to index funds but are bought and sold throughout the day like individual stocks. The speaker prefers investing in these types of funds to capture the overall trend of the stock market, rather than investing in individual companies.

💡

💡Risk Tolerance

Risk tolerance is an individual's ability and willingness to take risks with their investments. The video script discusses the need for investors to be comfortable with the volatility of the market, as the value of investments can fluctuate significantly, which is part of the 'squeeze' that comes with the potential 'juice' or returns from investing.

💡Trading 212

Trading 212 is a trading platform that allows users to invest in various financial instruments, including stocks and funds. The speaker uses this platform as an example to demonstrate how to start investing with as little as one pound, highlighting its user-friendly interface and the process of opening an ISA account for tax benefits.

💡ISA (Individual Savings Account)

An ISA is a type of tax-advantaged savings account available in the UK. The video explains that ISAs can protect investments from dividend and capital gains tax, making them an attractive option for new investors. The speaker suggests opening an ISA if the viewer has not used up their annual ISA allowance.

💡Diversification

Diversification is the process of spreading investments across various financial instruments, industries, and other categories to minimize risk. The video script touches on this concept when the speaker talks about buying a fund that represents the global stock market, thereby investing in over 3,600 different businesses at once.

💡Financial Advice

Financial advice involves guidance from a professional on matters relating to finances, including investments. The video script mentions that the speaker is not a financial advisor and cannot provide personalized recommendations, which is an important disclaimer when discussing investment strategies and options.

💡Regulation and Education

Regulation refers to the rules set by governing bodies to control financial practices and protect consumers. Education, in this context, refers to the need for financial literacy among the public. The speaker criticizes the regulatory bodies for not providing enough educational content on the benefits and methods of investing, which he believes would help more people to start investing and improve their financial well-being.

Highlights

The biggest risk in investing is not investing at all, emphasizing the importance of starting despite initial confusion and fear.

UK has a lower rate of equity participation compared to other European countries like Germany, France, and Spain.

A significant amount of UK's wealth is kept in savings accounts, leading to a loss of value due to inflation.

HSBC study reveals that lack of knowledge and fear of losing money are the main reasons people don't invest.

Investing in cash savings is often perceived as safe, but it carries the risk of long-term purchasing power loss due to inflation.

Investing is differentiated from speculation, with a focus on preventing the erosion of wealth over time.

Since 1950, the global stock market has provided an average annual return after inflation of 6.7%, showcasing the potential for wealth growth.

The preference for investing in funds, such as index funds and ETFs, to capture global market trends.

Investing involves volatility and the potential for investment values to fluctuate significantly over time.

Recommendation to invest money that one won't need for at least 10 years to withstand market volatility.

Trading 212 is introduced as a platform that allows starting investments with as little as a pound and offers a free share for new investors.

The process of opening an ISA account on Trading 212 is outlined, highlighting the tax benefits for investments.

Differentiating between income-paying funds and accumulation funds, and how to reinvest dividends for growth.

The simplicity of buying a fund that tracks the global stock market through Trading 212 is demonstrated.

The importance of starting early with investments, even with small amounts, to build confidence and understanding of market performance.

Criticisms of the financial regulatory system for not providing enough education on the benefits and methods of investing.

A call for regulators to provide free informative content on investing to improve financial well-being and participation in work-based schemes.

The video concludes with a personal anecdote about setting up an investment for the speaker's son and the importance of long-term perspective.

Transcripts

today I'm going to show you how to

invest your first1 pound but you can

follow along with £10 pound even a pound

if you like I firmly believe that the

single biggest risk when it comes to

investing is not investing at all I

understand that this can be confusing

and a bit daunting to get started so you

know that's what we're all about today

and we're not just talking high level

Theory either compound interest buy the

dip live love laugh slap it on a t-shirt

slogan kind of things I mean there will

be some of that because it is important

but there'll also be the exact button

clicks that you need to make to get

yourself started because let's be honest

here the UK has a problem we are the

worst investors in Europe I mean put

that on a t-shirt seriously the Germans

the French and the Spanish all

participate in equities at a higher rate

than the British and what do we do with

our British pounds we stick them into

savings accounts about 1.8 trillion sits

in cash savings in the UK nothing wrong

with a bit of cash for short-term

savings goals but that's

£27,000 for every man woman and child in

the UK sa in savings account

400 billion of that is set in accounts

that produce a 0 to 1% return that money

is just rotting away being eaten by the

effects of inflation HSBC did a study

into the reasons people didn't invest

their cash amongst the main reasons were

they didn't know how and they were

worried about losing their money these

are the two concerns we'll look to

address today because how much of that

1.8 trillion is placed in cash savings

by people who are scared they might lose

their money so instead they put it in a

place where they will definitely lose

their money long term it's not the rich

paying this ignorance tax they invest

it's those who would benefit the most

from the effects of the stock market

that ultimately miss out hmrc data found

that 90% And 80% of the least wealthiest

and middle class families elect to open

Cash IES instead of vehicles that invest

in equities I think the UK's view on

what investing actually is has been

confused and warped to the point where

they see the stock market is risky

speculative gambling and cash as a safe

investment it's not it's filled with the

very real risk and that is the long-term

destruction of purchasing power due to

the corrosive effects of inflation this

book was written in 1940 it's a great

read and The Core lesson still holds

true today basically that the

traditional Finance world is full of

robbing bastards but in the book there's

a definition of investing from all those

years ago that I still think Rings true

today speculation is an effort probably

unsuccessful to turn a little money into

a lot investment is an effort which

should be successful to prevent a lot of

money from becoming a little by choosing

cash savings over investing for

long-term goals like retirement the

British public are turning a lot of

money into a little and by confusing

investing with speculating you know Meme

stocks nfts the latest investing craze

the British public have been turned away

from one of the great wealth protecting

and building opportunities that we all

have available to us since 1950 the

global stock market has produced an

average annual return after inflation of

6.7% that is the trend that I'm looking

to capture it's that ride that I want to

be on because of that trap record of the

global stock market to outrun inflation

long term now of course you have the

option to invest in specific individual

companies Tesla Nvidia Amazon whoever

you want and I'll show you how to do

that but my preference and the core

investment approach that I use in my

portfolio is by buying funds to capture

that Trend Global funds in this case

you'll hear these funds referred to as

index funds and ETFs the difference

between the two are not big enough for

me to go into today and I've linked an

article below that covers them in more

detail if you want to take a look at it

but at a high level there's simply one

investment that you can buy that

represents in this case the global stock

market you can also get ones that do

things like track the American Stock

Market or the UK stock market now it's

not as simple as just buying one of

these Investments hopping onto the ride

and every year you get a fixed return

this is a bumpy ride and the value of

your investments will go up and down day

by day and some years you'll be down

overall in fact there have been times in

history where the value of your

Investments have fallen 3 years in a row

this chart shows that nicely the average

return I spoke about is this gray line

here it's near 10% in this case because

it's before inflation and notice how

hardly any years come close to the

average and that in reality there's

large swings up and down in the value of

your Investments throughout history I

think good practice really is to say any

money that I'm investing is money I

won't need for 10 years this is the

volatility you need to be comfortable

with if you want the benefits of

investing if you want the juice then

that is the squeeze and the only way to

really know if it's something that you

can handle if it's something that you

can stomach is to have a bit of skin in

the game luckily as I said you can get

that skin in the game for as little as a

pound so let's just get on with it shall

we and get down to business grab a phone

or computer some form of payment details

and a novelty t-shirt of your choice and

let's just get on with it f I'll be

using trading 2 on2 today for this

example I've been using them as my main

is of Provider now for a couple of years

and they allow new investors to start

with as little as a pound you even get a

free share worth up to £100 when you

sign up using the link in my description

and deposit a quid you can use any

broker you like the theory is the same

the button clicks are obviously

different So Below I've dug out some

videos breaking down the button clicks

required for as many UK Brokers as I

could find I've also put together some

free resources to help you with this

broker and any others that you might use

but we'll talk about those in a moment

so download the trading 212 app onto

your phone first the process that I'm

about to go through is basically the

same on desktop but I'm just going to

focus on the phone today you'll first be

asked to pick an account type that you

wish to use the invest account and Isa

account are pretty much the exact same

thing but the ISA will protect your

investments from dividend and capital

gains tax in the future if you've never

invested before and you've not used up

your 20K iser allowance for the year

elsewhere then I would be opening up an

iser account the cfd arm here is very

much in the speculation category we

spoke about before 2 on two themselves

advertise that over 70% of people who

try cfds for the first time lose money

so if we choose the ISA you'll then be

asked to provide information like name

date of birth they will also ask you for

income levels and if you have any

savings they will also ask you for a

copy of your passport and driving

license as part of their kyc know your

customer requirements you're then going

to have to take a rather awkward selfie

you'll then be asked if you want to

create a pie or manually deposit some

money yourself I will make a manual

deposit and you can either deposit now

or there are plenty of ways that you can

top up money onto the app at a later

point if you want to I normally press

the three lines here and you can just

see at the bottom it says deposit funds

here so this bit is important you have a

number of ways that you can pay money

onto the platform here the top two

options allow you to put money on the

platform for completely free but the

bottom options here once you've

deposited more than £2,000 onto the

platform you then pay a 0.7% fee no one

needs to pay this fee I always use these

top options it's very quick you just get

bounced around between your bank and

trading 21 to then you get this slider

option asking you how much you want to

deposit or if you press the Dots here

you can just input a number I've

deposited 100 for the purpose of this

video but just make sure it's at least

£1 that you put on the platform if you

don't get your free share at this point

the 1 deposit should trigger this then

press the three lines again at the

bottom here go to promo code and just

input Damian d a m i n so buying a fund

couldn't be simpler trading 212 have

hundreds to choose from and include a

list here of the most popular ones BL

also included a spreadsheet that lists

some of the most popular fun choices on

all of the major platforms focusing on

the USA and Global stock market I've

tried to explain what they do the fees

and just some stuff to help you with

your own research when picking your own

fund as I said trading 212 have hundreds

of funds to choose from I'll show you

the process of buying one fund that

tracks the global stock market I'm

showing you this fund because it's a

fund that I use please understand this

video is to show you the process of

buying a fund and I'm not saying you

should buy this actual fund far from it

I'm not a financial advisor and even if

I was I don't know your personal

circumstances so I'm not qualified or in

a position to make recommendations to

you on what you should invest in this is

more just to show you the functionality

and to show you the process which is

really quite simple the fund on buying

is vwl V is for Vanguard and WL is an

abbreviation of world so this is

vanguard's World fund this version of

the fund is income paying all that means

is any dividends which are shares of the

profits the businesses pay to you for

owning them are paid as cash into your

account so in this example every three

months you'll get a payment onto trading

212 or whichever broker you use and that

is that dividend payment it's these

dividends and the growth in the price of

the fund itself that make up the two

types of gains that we hope to see by

being in an Isa we shelter both from tax

when you start investing the most

powerful thing that you can do with

these dividends is used to buy more of

the fund with them so when I get those

payments I just throw them straight back

into the fund I quite like doing this

process myself I find it's a bit fun

getting the notification and making that

reinvestment but vwp is the same fund as

vwl but instead it does that reinvesting

of dividends for you this is known as an

accumulation fund on the cheat sheet

that I put together I've listed both

income and accumulation version of funds

where possible so you can see how the

names May differ between the two once

you have the fund that you want just

press buy and then you'll met with a

slider and dots option again and you can

simply buy the fund and that's it I'm

now the proud owner of in this case a

fund that represents the global stock

market by buying into over 3,600

different businesses at once and if you

want to buy a specific company like

apple or meta or whoever you can do that

in almost the exact same way by clicking

on the magnifying glass here finding the

company you wish to buy and it's the

exact same process as before again as

little as a pound to start I recently

sat down with my son the other day and

set up a small investment P inside my

iser account so he can stick some pocket

money into it and get used to how the

market performs I've said to him he

can't touch it until he's 15 and My Hope

Is by the time he gets to 18 he realizes

that this is something that works and

that he could benefit from and he can

get on it early the issue is now he has

ask me every other day if he's Rich yet

and I have to remind him that putting 5

in won't make you rich and it's the same

with this sticking a quid in isn't going

to change your life but if it gives you

the confidence that this is something

you can do that might just change your

life I think the regulator in this

country does a pretty good job of

protecting people but a really bad job

of educating people risk warnings around

products are essential but so is an

adult conversation around the benefits

of investing and then practical

actionable education about how to get

involved I sit here trying to spell it

out to people but all the while I'm

paranoid about showing you a particular

Fund in case in any way it's seen as

Financial advice but if you want that

actual Financial advice if you want to

speak to a qualified advisor they will

say to you well unless you've got at

least 200 Grand I can't help because the

regulator's requirements placed on me as

such that I need you to have that sort

of money to justify my time my question

is then how is anyone meant to get to

£200,000 in Investments if no one ever

shows them how to invest I wish the

regulator would provide free informative

content on the benefits of investing and

the ways that people can do it so the

vast majority of the UK population who

do not qualify for financial advice can

get themselves started and we can

address this problem of billions of

pounds of cash rotting away in accounts

it's The Regulators job to protect first

and foremost but by educating the public

you protect them from seeking out

information online from Bad actors or

falling into Shady schemes like cash FX

or whatever the latest pump and dump

Ponzi scheme is it's not a pyramid

scheme it is a it's not even a scheme

per se

it's this education would then improve

the financial well-being of the nation

and increase active participation in

work-based schemes reducing the burden

of a growing pension crisis teach a man

to fish and all that I mean I'm speaking

in t-shirt slogans again aren't I look I

hope this helps some people get started

on their investing Journey I've also now

got a shedload of stupid t-shirts with

silly slogans written on them I think

this is my favorite one if anyone wants

one by any chance leave an invest in

related below and the top voted comments

I'll send one out in the post and

whoever is the top voted comment overall

also throw in a copy of this book I just

need to warn you I have worned them um

I'll Chuck them in the wash to be fair

some of you probably prefer that I

didn't want you have a little sniff and

all of that and they are an extra large

I've been hitting the gym going to need

an Isis soon to protect these

gains that's terrible was it let's end

the video there