How to Invest for Beginners in 2025

Summary

In this video, the presenter explores five different investment options for beginners starting with just $100. The investments include individual stocks, REITs, cryptocurrency, gold, and index funds, each evaluated on learning curve, passive income potential, tax efficiency, and risk level. The presenter shares personal results from these investments over four years, highlighting both the risks and rewards of each. With a focus on long-term growth and diversification, the video encourages viewers to start investing early and emphasizes the power of compounding to grow wealth over time.

Takeaways

• 😀 Start investing with small amounts, like $100, and use it as an opportunity to learn and experiment.
• 😀 Individual stocks can be exciting, but they come with a high learning curve and substantial risks, especially if you're not well-versed in analyzing financial statements.
• 😀 Passive income from stocks comes from capital appreciation and dividends, but not all stocks pay dividends, and results can vary significantly.
• 😀 Tax efficiency is excellent with stocks when using tax-advantaged accounts like ISAs in the UK or Roth IRAs in the USA.
• 😀 The risk of investing in individual stocks is high due to market volatility, and a strategy based on luck (e.g., picking stocks randomly) can lead to significant losses.
• 😀 REITs (Real Estate Investment Trusts) allow you to invest in property without owning physical real estate, offering moderate learning curve and good passive income through dividends.
• 😀 REITs offer tax advantages in some countries, like the UK, when held in a tax-advantaged account, and their risk is moderate compared to individual stocks.
• 😀 Cryptocurrency investing has a moderate learning curve and high risk, with potential rewards, but it also presents challenges with tax efficiency and security (e.g., scams and hacks).
• 😀 Bitcoin and Ethereum have performed well over the past decade, but cryptocurrency remains highly volatile and speculative, requiring careful risk management.
• 😀 Index funds are ideal for beginner investors due to their low learning curve, low risk, and ability to deliver solid, long-term returns by diversifying across multiple stocks in major indices like the S&P 500.

Q & A

What are the key factors to consider when evaluating different investment options?

The key factors to consider are learning curve, passive income potential, tax efficiency, risk level, and the investment's performance over time. These help assess how easy it is to get started, the potential for earnings, the tax advantages, and the level of risk involved.

What is the learning curve for investing in individual stocks?

The learning curve for individual stocks is high. To be successful, you need to analyze a company's fundamentals, including income statements, balance sheets, and cash flow statements. This requires significant research and strategy, particularly for long-term investments.

What is passive income potential in stock investing?

The passive income potential from stocks comes from two sources: capital gains (selling the stock at a higher price) and dividends. Dividends provide regular payouts to shareholders, offering passive income without needing to sell the stock.

What are some tax advantages of investing in stocks and shares ISAs or Roth IRAs?

Investing in stocks through tax-advantaged accounts like the UK's Stocks and Shares ISA or the U.S.'s Roth IRA helps shield profits from taxes. This means that capital gains and dividends earned through these accounts are tax-free, which can significantly boost returns over time.

What are the risks associated with individual stock investing?

The risks of individual stock investing are high. The market can be unpredictable, and if a company fails or a stock's value drops, you could lose all of your investment. Diversifying your portfolio can reduce some of the risk.

How did the $100 investment in Samsung perform over four years?

The $100 investment in Samsung was worth $67.76 after four years, resulting in a negative return of -32.34%. This highlights the risk of individual stock investing, where performance can be highly variable.

What is a REIT (Real Estate Investment Trust), and how does it work?

A REIT is a company that owns, operates, or finances real estate that generates income. It allows individual investors to pool their money together to invest in large-scale properties without buying property directly. REITs often pay high dividends, as they are required to distribute at least 90% of their income to shareholders.

What are the risks and benefits of investing in a REIT?

The benefits of investing in a REIT include earning steady passive income through dividends, and the risk is medium. While REITs are generally more stable than investing in a single property, they still carry the risk of poor performance if the real estate market downturns or properties are not fully rented.

What is the tax efficiency of REITs compared to other investments?

REITs are tax-efficient because they offer great tax benefits. In many countries, you can hold REITs in tax-advantaged accounts like Stocks and Shares ISAs, making any profits or dividends tax-free.

How did the investment in cryptocurrency perform over four years?

The $100 investment in Bitcoin was worth $652.24 after four years, yielding a return of 552.24%. This highlights the high potential rewards of investing in cryptocurrency, though it is highly volatile and speculative.

What are the main risks involved with investing in cryptocurrency?

The main risks of investing in cryptocurrency are its extreme volatility and the potential for significant financial losses. Cryptocurrencies can experience massive price swings, and there is also the risk of hacks or scams due to the unregulated nature of the market.

How does gold compare to other investments in terms of risk and return?

Gold is considered a safe haven during times of economic uncertainty, with a medium risk level. While it offers steady growth and helps protect wealth during inflationary periods, it does not generate passive income like stocks or REITs, and its growth potential is lower compared to more dynamic investments like stocks or crypto.

What is the return on a $100 investment in gold over four years?

A $100 investment in gold through an ETF was worth $140.10 after four years, yielding a return of 40.1%. This demonstrates gold's steady growth, although not as high as more volatile assets like Bitcoin.

What are index funds, and why are they considered a good investment option?

Index funds are investment vehicles that track the performance of a specific market index, like the S&P 500. They are considered a good investment option because they offer low fees, diversification, and long-term growth potential with lower risks compared to individual stock investing.

What is the risk level and return of investing in index funds?

The risk level of index funds is low because they are diversified across hundreds or thousands of companies. Historically, index funds, like those tracking the S&P 500, have delivered average annual returns of 8–10%. Over the long term, they are considered one of the safest ways to grow wealth.

How did the $100 investment in an S&P 500 index fund perform over four years?

The $100 investment in an S&P 500 index fund grew to $179.57, yielding a return of 79.57%. This showcases the power of long-term investing and the consistent growth potential of index funds.