I Invested $5 a Day for 27 Months. Here's What Happened.

Summary

The video script details a personal finance experiment where the creator invests $5 daily into the stock market, starting in January 2022. By April 2024, the strategy has resulted in a modest return, with the creator emphasizing the importance of consistency and diversification. The video compares this approach with investing in individual 'hype stocks', highlighting the risks and potential pitfalls of focusing on individual companies rather than a broad market index like the S&P 500. The creator also discusses the benefits of using apps like Robinhood and Weeble for investing and the importance of not putting all eggs in one basket.

Takeaways

• 💡 The video discusses a concept of investing small amounts daily, such as $5, as an approach to building wealth over time.
• 🚀 The speaker started the '$5 a day investment challenge' in January 2022 and has been consistent for 27 months up to April 2024.
• 📈 The challenge involves investing in the S&P 500 index fund (VO) through an app like Robinhood or Weeble, which offers more options and higher interest rates on uninvested cash.
• 🔄 The speaker initially invested manually but then set up an auto-invest feature to automate the daily $5 investment.
• 📊 The investment strategy takes advantage of dollar-cost averaging by investing through market highs and lows, which helps to lower the average cost over time.
• 📉 The speaker emphasizes the importance of diversification and the risks of investing in individual 'hype stocks' that may not perform well in the long term.
• 📈 A comparison is made between the consistent returns of the S&P 500 index fund and the variable performance of individual stocks like AMC and TORAY, highlighting the unpredictability of single stock investments.
• 📊 The video shows that, despite the challenges of 2022, the S&P 500 investment has a total return of $921, or 2.93%, demonstrating the power of consistent, small investments.
• 💥 The speaker warns against the allure of 'hype stocks' that promise high returns but may not deliver, using the example of Tattooed Chef (TTCF) which went bankrupt.
• 🌟 The video highlights the success of Palantir Technologies (PLTR) as an exception, showing significant growth with a $5 daily investment over the period.
• 🤔 The speaker encourages viewers to consider the long-term stability and growth potential of their investments, rather than chasing short-term hype.

Q & A

What is the main idea presented in the video script?

The main idea is the concept of investing a small, consistent amount daily, such as $5, into the stock market as a way to build wealth over time, as opposed to investing a large sum all at once.

What was the initial investment strategy proposed in January 2022?

The initial strategy was to invest $5 every single day into the stock market, starting from January 2022.

Why is investing $5 a day considered easier than investing a large sum like $10,000 or $25,000?

Investing $5 a day is considered easier because it requires less upfront capital and can be achieved by cutting out small, non-essential expenses from daily life, making it more accessible for individuals with limited funds.

What is the significance of the 27 months of consistency mentioned in the script?

The 27 months of consistency refer to the period from January 2022 to April 2024, during which the investor has been consistently investing $5 a day into the stock market.

What is the difference between investing in individual stocks versus an index fund like the S&P 500?

Investing in individual stocks means putting money into specific companies, which can be risky as their performance may vary greatly. An index fund like the S&P 500, on the other hand, provides diversification by investing in a broad range of top companies, reducing risk.

Why did the author switch from manual daily investment to an auto-invest feature?

The author switched to an auto-invest feature for convenience and to ensure consistency, eliminating the need to manually invest $5 every day and reducing the chance of forgetting to invest.

What is the advantage of investing $5 daily instead of a lump sum amount monthly?

Investing $5 daily takes advantage of the highs and lows of the market, implementing a strategy known as dollar-cost averaging, which can potentially reduce the impact of market volatility compared to investing a lump sum at a specific time.

What is the result of the $5 a day investment challenge after 27 months?

After 27 months, the result is a total of 10.74 shares in the S&P 500 fund, with a market value of $512, an average cost of $391, and a total return of $921, or 2.93%.

What is the risk associated with investing in individual 'hype stocks' as mentioned in the script?

The risk with 'hype stocks' is that they can be highly volatile and their performance may not be sustainable in the long term. There is a chance that they could lose significant value or even go bankrupt, as seen with the example of Tattooed Chef (TTCF).

What is the conclusion the author draws from comparing the $5 a day investment in the S&P 500 to investing in individual hype stocks?

The conclusion is that while some hype stocks like Palantir Technologies (PLTR) may show significant growth, the overall performance of a diversified investment in the S&P 500 through an index fund is more stable and less risky, emphasizing the importance of diversification.