Investing for Beginners - How I Make Millions from Stocks (Full Guide)

Summary

The video script narrates a personal investment journey, illustrating the power of long-term investing despite market crashes. It guides viewers on setting up an account, choosing tax-advantaged options, depositing funds, and emphasizes the benefits of index funds for diversification. The script also offers a step-by-step tutorial on investing in stocks using the Trading 212 app, highlighting the importance of a strategy, the potential for significant returns, and the impact of starting early. It concludes with a reminder of the risks and the importance of a gradual, consistent investment approach.

Takeaways

• 💡 Investing early and consistently can lead to significant wealth accumulation over time, as illustrated by the speaker's personal experience starting in 1985.
• 📉 Despite market downturns like 'Black Monday' or the NASDAQ crash, staying invested can result in substantial long-term gains as markets recover.
• 🤔 The power of investing lies in its potential to provide substantial returns, such as the speaker's example of a 6000% return from a small monthly investment.
• 📱 The process of investing has been simplified with modern technology, allowing for easy account setup and transactions through apps like Trading 212.
• 💼 Opening a tax-advantaged account, such as a stocks and shares ISA in the UK or a Roth IRA in the US, can maximize investment returns by reducing tax liabilities.
• 💰 The importance of having an emergency fund before investing was emphasized, suggesting a fund size of three to five months of living expenses.
• 🎁 The script mentions a promotional offer for new users, highlighting the opportunity to receive free stocks by using a specific promo code and inviting friends.
• 📊 The concept of investing in index funds was introduced, which allows investors to diversify their portfolio by investing in a basket of companies rather than individual stocks.
• 🔄 The strategy of automating investments, such as investing a fixed amount daily or monthly, was presented as a way to build wealth over time without constant monitoring.
• 📈 Historical data projections were used to demonstrate the potential of long-term, gradual investing, showing how even small amounts can grow into substantial sums.
• 📚 The speaker prefers to use fundamental analysis over technical analysis when picking stocks, focusing on a company's financial health and market position for long-term investment decisions.

Q & A

What significant event occurred in 1985 that the speaker started investing before?

The speaker started investing in 1985, which was before the 'Black Monday' stock market crash in 1987.

What is referred to as 'Black Monday' in the script?

'Black Monday' refers to the stock market crash that occurred on October 19, 1987, when Wall Street experienced its largest one-day percentage decline in history.

What was the impact of the 'Monday Massacre' on the speaker's investment?

Despite the 'Monday Massacre' causing a significant drop in the market, the speaker did not sell and eventually saw the market recover.

Why did the speaker's friends urge him to sell during the market downturns?

The speaker's friends urged him to sell during market downturns because they were concerned about preserving the profits and avoiding further losses.

What was the average annual return over the time period mentioned by the speaker?

The average annual return over the time period mentioned by the speaker was 11.23%.

How much would a $250 monthly investment have grown to, according to the speaker's calculations?

According to the speaker's calculations, a $250 monthly investment would have grown to $1,841,521.08 over the time period.

What type of account does the speaker recommend for tax advantages in the UK and the US?

The speaker recommends stocks and shares ISAs in the UK and Roth IRAs in the US for their tax advantages.

What is the difference between a market order and a limit order when buying stocks?

A market order is an order to buy or sell a stock at the best available price in the market. A limit order allows you to set a specific price at which you want to buy or sell a stock, and the order will only execute if the stock reaches that price.

What is an index fund, and how does it work?

An index fund is a type of mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules of a particular index. It works by investing in all the companies listed in an index, like the S&P 500, so that if one company performs poorly, the investment is spread across many others, reducing risk.

What is the significance of automating investments as described in the script?

Automating investments, such as investing a fixed amount regularly, allows for the practice of dollar-cost averaging, reduces the impact of market volatility, and helps in building a portfolio over time without the need for constant manual intervention.

How does the speaker address concerns about the risk of investing in the stock market?

The speaker addresses concerns about risk by emphasizing the importance of starting early, having a diversified portfolio of index funds, and investing gradually over time, which historically has allowed investors to endure market crashes and recover.

Outlines

00:00

📈 The Power of Long-Term Investing

The first paragraph narrates the personal investment journey of the speaker, starting from 1985 through various market crashes and recoveries. Despite the panic and advice to sell during downturns, the speaker held on and benefited from the market's eventual recovery. The narrative illustrates the concept of long-term investment and the significant returns it can yield, with an example of a $250 monthly investment growing to over $1.8 million. The speaker emphasizes the importance of investing more than just talking about it and introduces the idea of investing in stocks through a mobile app, highlighting the importance of having an emergency fund and choosing the right type of investment account for tax advantages.

05:02

🎼 Investing in Index Funds: Diversification Made Easy

The second paragraph explains the concept of investing in index funds as a strategy for diversification, drawing a parallel with music charts where the performance of songs determines their ranking. The S&P 500 is used as an example of an index fund that includes the largest public companies in the USA. The paragraph details the benefits of investing in an index fund, such as spreading risk across multiple companies and the potential for automatic reinvestment of dividends through accumulation funds. The speaker shares his son's experience with daily automated investments into the S&P 500 and discusses the importance of setting up an automated investment plan, using the Trading 212 app as an example. The paragraph also touches on the potential long-term gains from such investments and addresses common concerns about inflation and the importance of gradual, consistent investing.

10:02

🚀 Navigating Stock Investments and the Benefits of Early Start

The final paragraph focuses on the practical steps of buying individual stocks through the Trading 212 app, starting with a market order for Tesla. It contrasts market orders with limit orders, providing a beginner-friendly explanation of both. The speaker emphasizes the simplicity of the process and encourages viewers to take advantage of a free stock offer. The paragraph concludes with a discussion on the risks associated with investing and the importance of starting early. It uses a visual comparison to demonstrate the impact of beginning investments at different ages and ends with a call to action for viewers to subscribe for more wealth growth content.

Keywords

💡Investing

Investing refers to the act of allocating resources, such as money, with the expectation of generating an income or profit. In the video's context, it is about putting money into financial assets like stocks with the hope of increasing its value over time. The script narrates the personal journey of investing since 1985 and highlights the importance of long-term investment strategies.

💡Black Monday

Black Monday, also known as the 'Monday Massacre,' is a historical event that took place on October 19, 1987, when stock markets around the world crashed, leading to a significant drop in stock prices. The video uses this term to illustrate a critical moment in the investor's journey, showing how markets can experience dramatic downturns.

💡NASDAQ

NASDAQ is an abbreviation for the National Association of Securities Dealers Automated Quotations. It is a major American stock exchange known for listing technology and internet companies. The script mentions a NASDAQ index free fall, indicating a sharp decline in the value of technology stocks, which is a key part of the investor's narrative.

💡Index Fund

An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, like the S&P 500. The video emphasizes the benefits of investing in index funds as a way to diversify risk and invest in a broad market segment with a single transaction.

💡Roth IRA

A Roth IRA is a retirement savings account in the United States that allows for tax-free growth and withdrawals, provided certain conditions are met. The script compares Roth IRAs with UK stocks and shares ISAs, highlighting the tax advantages of these accounts for long-term investment planning.

💡Diversification

Diversification is an investment strategy that involves spreading investments across various financial instruments, industries, or other categories to minimize risk. The video script advocates for diversification by recommending the investment in index funds, which inherently contain a variety of companies, thus reducing the risk associated with individual stock performance.

💡Automated Investing

Automated investing refers to the process of setting up an investment plan to execute trades automatically at regular intervals. The script describes an example of automated investing where the investor's son invests a fixed amount in the S&P 500 index fund daily, demonstrating a hands-off approach to long-term wealth building.

💡Market Order

A market order is an instruction to buy or sell a security at the best available price in the market. In the video, the term is used to explain one of the methods of purchasing stocks, where the investor agrees to buy at the current market price without specifying a limit.

💡Limit Order

A limit order is an order to buy or sell a stock at a specific price or better. It allows investors to set a maximum purchase price or a minimum selling price. The script contrasts this with a market order, suggesting that a limit order can be a strategic tool for investors looking to buy stocks at a desired price.

💡Fundamental Analysis

Fundamental analysis is a method of evaluating a security's intrinsic value by examining its financial statements, management, industry position, and other factors. The video script mentions that the investor prefers this approach over technical analysis, focusing on the company's underlying strengths and weaknesses to predict its long-term performance.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The video addresses concerns about inflation eroding the value of money, advocating for investing as a means to outpace inflation and maintain or grow wealth over time.

Highlights

Investing since 1985 experienced ups and downs including Black Monday and the NASDAQ crash.

Despite market crashes, the speaker held strong and witnessed market recovery, illustrating the power of long-term investment.

The impact of the global economy contracting by 3%, the worst downturn since the Great Depression, and the subsequent market rebound.

The speaker's personal investment journey since turning 18, achieving an average annual return of 11.23%.

Calculation that investing $250 per month over the period could result in a return of over 6000%.

The importance of having an emergency fund before investing and the process of setting up an investment account.

Advantages of tax-advantaged accounts like stocks and shares ISAs in the UK and Roth IRAs in America.

Demonstration of depositing funds into an investment account using various methods including Apple Pay.

Offer of a free stock worth up to a hundred pounds for new account creations using the code 'TILBURY'.

Explanation of the concept of investing in index funds as a strategy to spread risk across multiple companies.

The S&P 500 index fund as an example of an investment that includes the largest public companies in the USA.

The benefits of automating long-term investments with a daily investment example of £5 into the S&P 500.

How to set up an automated investment plan using the Trading 212 app with projections for potential returns.

Addressing concerns about inflation and its impact on investment returns, with strategies to mitigate it.

The speaker's approach to picking individual stocks through fundamental analysis of company financials and brand strength.

A step-by-step guide on how to buy a stock using the Trading 212 app, including market and limit orders.

The importance of starting to invest early and the significant difference it makes in long-term growth.

Transcripts

- I want you to imagine for a moment

that you started investing in 1985,

for a couple of years,

your money keeps going up and up, until...

- [Announcer] Black Monday.

- [Announcer 2] They're calling it the "Monday Massacre."

- [Announcer 3] Wall Street had its biggest one day drop

in history.

- [Announcer 4] The results of the decline

will hit millions of people.

- Up until this point, your friends probably thought

you were some kind of genius.

But now they're urging you to sell, but you ignore them,

and slowly but surely, the market recovers,

until...

- [Announcer] The NASDAQ index in free fall,

down nearly 10%.

- [Announcer 2] Driven by technology in general

and the internet in particular.

- [Announcer 3] Traders and investors, shell shocked.

- Your friends are on their knees begging you

to pull your money out.

Saying things like it's time to take your profits

before you lose everything.

But you hold strong

and things start going back up until you are hit with...

- It was one of the most profound events

in generations with huge consequences.

- Little did you know you are in for the ride of a lifetime,

until...

- [Announcer] The global economy will contract

by 3% this year.

The worst downturn since the Great Depression.

- Surely this is the end of the stock market,

but as things reopened,

the market soared 27% from its low, setting new records.

What a comeback.

Something I didn't mention

is the guy that invested his money in 1985 was actually me,

when I turned 18 years old.

The average return over this time period

was 11.23% per year.

So if I'd have only invested $250 per month

during this time,

then I would've made $1,841,521

and 8 cents.

That's a return of over 6000%,

but between us, I invested a lot more than that.

So now you understand the power of investing.

I think it's time to jump into the details.

Honestly, it's amazing how many people talk about investing,

but don't actually show you how to do it.

So I'm gonna quickly walk you through

how to invest in stocks on your phone.

Of course, remember, I'm not a financial advisor.

This is just the way I do it,

and before you do any of this,

make sure you have an emergency fund

of three to five months of living expenses.

The first thing on our list is to set up an account.

A lot of people get stuck at this stage,

as there's a lot of different investment platforms out there

and also different types of accounts.

But trust me, it's much more simple than it first seems.

Especially now you can do it all online.

When I first started investing,

I had to phone up the stockbroker

every time I wanted to buy a stock.

Let's use the Trading 212 app.

I'm gonna be using my son's account,

as my account's pretty messy,

as it has a bunch of free shares.

He's actually been running an experiment on here

for the last three months,

but we'll talk about that in a bit.

The account you open should be a tax advantaged one.

This means you won't have to pay any unnecessary taxes.

These are known as stocks and shares ISAs in the UK,

and Roth IRAs in America.

I think the UK option's much better,

as you can invest up to 20,000 pounds a year

without paying capital gains tax on your profits

and you can take out your money whenever you want.

In contrast, Americans have to wait

until they're old and retired

and they have a much lower limit of $6,500 per year.

Feel free to use whatever app you like.

This is just one of my personal favorites.

Next, we need to deposit some money

in order to start investing.

Most apps make it pretty easy to deposit money.

We just have to click these three lines

and then select deposit funds.

As you can see, this brings up a screen

with lots of different options like instant bank transfer,

bank transfer, debit card,

and what we are gonna use, Apple Pay.

Let's just put in 400,

so we can invest in some stocks together.

Feel free to invest whatever you feel comfortable doing.

Curtis, I'm gonna need your face for the phone.

- [Curtis] Alright, hang on.

- This next step is super important,

getting some free stocks.

Since I was planning to talk about Trading 212 anyway,

I reached out to them to see if they would be interested

in sponsoring this portion of the video.

They agreed and they're offering a free stock

worth up to a hundred pound to anyone

that uses the code "TILBURY" when they create an account.

Plus, you can get more free shares by inviting your friends.

Both of you will get a free share,

as long as they fund their account,

so don't waste your invites and invite brokies.

And also don't worry if you've already opened an account

within the last 10 days,

you can still use the promo code "TILBURY" in the app

and receive your free share.

Right, now we need to plan a winning strategy.

The first thing we need to remember is

that investments go up and down.

So it's very hard to pick winning individual stocks.

That's why I prefer to invest in all of them.

You probably think this sounds a bit crazy,

but stay with me.

I love listening to music.

I'm a big Deacon Blue and Queen fan myself,

but whatever you like, if you've ever listened

to the radio, or used Spotify,

you'll be familiar with the music charts.

The better the songs perform in sales and downloads,

the higher up they go in the charts.

On the other hand, if a song drops in popularity and sales,

then it drops out of the charts.

This is almost exactly the same

as investing in an index fund.

All you have to do is switch out the songs for companies.

Let's take the S&P 500 for example.

This is a list of around 500 of the largest public companies

in the USA,

the big dogs being Amazon, Google, Apple, and Tesla.

And just like the music charts, if a company does poorly,

then they risk being removed from the list.

Here's the cool part about an index fund,

with just one click,

you're not just investing in one or two companies,

but in every single company on the list.

So if one doesn't perform very well, your money's okay,

as you are spread across all of them.

So how can we put this into practice?

Well, we need to automate our long-term investments.

Remember I said my son had been running a little experiment

for the last three months on his account.

Well, he's been investing five pounds

into the S&P 500 every day.

Why five pound?

Because that's about the average price

of a Starbucks coffee.

Automating your investments like this is a great idea

as it means you can just set it and forget it.

His portfolio is actually doing pretty well.

As you can see in the green.

His return so far is 36 pounds of 46 pence,

and that's a return of 5.03%.

Not bad for a little experiment.

If you want me to keep you updated with this

when it reaches the six month mark,

let me know in the comments.

To set something like this up,

all you have to do is select pies

and then press the plus icon.

Now you can select whatever stocks you want to include

in your pie.

For this demonstration, let's just keep it easy

and pick this S&P 500 index fund.

By the way, look out for if it says

accumulation or distribution in the brackets.

Personally, I always go with accumulation,

as it reinvests your dividends

back into the stock automatically,

the less I have to think about the better.

Now let's tap add to pie and then the arrow button.

If there was more than one stock in here,

then we'd be able to change the percentages

with this slider.

Right, tap next, and then auto invest.

This value projection is really awesome,

as it shows you how much money you could make

based on historical averages.

Of course, when you invest,

you can get back less than you invested,

as investments can rise and fall,

but it's still a great way to get an idea

of how much you could make based on data backed projections.

I mean, say we invested 250 pounds a month for 31 years,

you'll only have invested 94,000 of your own money.

Your portfolio would be 1.14 million.

If we expand this to 40 years,

your portfolio would be 3.56 million.

It's worth having to play around with this,

as it's quite motivational,

seeing how much money you can make

with a relatively small amount invested per month

and to all the people in the common saying,

"Well, what about inflation?

It will make your money worth far less."

As long as you're investing

and not just keeping your money in a bank account,

then inflation is not something

you need to be extremely worried about.

Additionally, I increased the amount I was investing

to keep pace with inflation.

Now let's pick some individual stocks.

Although I wouldn't recommend that beginners bother

with picking stocks.

I know many of you're gonna try anyway,

especially since you've seen people make millions

from the right meme stock that skyrocketed, like GameStop.

Alright, so there's basically two ways

to take a stab at figuring out what's going on

in the stock market.

Technical and fundamental analysis.

Those quick deal day traders are all about

the technical stuff, pouring over price charts and patterns,

thinking they've got the scoop

on how the stock's gonna swing

just by eyeballing the ups and downs.

Now me, I'm more of a long-term player.

I dig into the nitty gritty of a company's fundamentals.

You know, the financials, who's steering the ship,

and how well known the brand is.

I reckon that's where the real lowdown is

for predicting a stock's long-term success.

So I sift through income statements, balance sheets,

and cash flow statements.

When I throw money into a stock,

I'm in it for the long haul,

at least two to five years minimum.

To find stocks, simply click on the magnifying glass icon.

Trading 212 have made it incredibly easy

to find stocks by providing various lists,

such as big tech, popular ETFs, banks are most owned.

There's also lots more, take a look

when you find a bit of time.

You can even go on the social feed tab

and see different pies that other users have created

and copy it for yourself with a single click,

so you don't have to find the stocks yourself.

On the stock page, you can see the price graph

and by scrolling down you can actually access

all those important financial documents I discussed earlier.

Now, let's buy a stock, Tesla will do.

Now this pulls up a page with a couple of different options.

The first one is a market order.

A market order is just like when you go to the supermarket

and pay whatever the price tag says.

A limit order on the other hand,

is like going to a boot fair and haggling

for the best price you want.

You can put in a price that you are willing to pay,

and if the price ever gets to that level,

then the app will purchase the stock for you.

As a beginner, that's all you really need to know.

There's no point diving into the other options.

Let's buy £400 worth of Tesla,

so I can show you how it's done.

The final step is to press send by order,

and boom, we're now part owners of Tesla.

So now you know all the steps,

and you've got a free stock

with the link in the description.

What's holding you back?

Well, it all sounds great, Mark,

but isn't investing a bit risky?

Well take a look at this.

If you are investing a single amount every month

from the age of 25, you would be around about here

if you invested for around 30 years.

Now, if you waited 10 years, this is the difference

that will make your growth, somewhere around about here.

Look at the difference, it's absolutely crazy.

So start young.

If you have a diversified portfolio of index funds

and keep investing at a gradual rate

each and every year,

then even if there's a stock market crash,

then historical data shows you should be able

to endure the storm, just like I did.

If you want to know why net worth goes crazy

after 100 K, then you can check out this next video,

but don't click on it just yet.

Make sure to subscribe if you want to grow your wealth.

Okay, I'll see you over there.