Hey everyone, I'm gonna talk to you a little bit about investing for beginners. How to get started, what's the best way to get started, and what advice do I have for people that are brand new.
I was reading these self-help books and I read some books on finances. And I just learned some basics about investing and I realized the most important thing is to start as early as possible. Because the earlier that you have to start investing then the more beneficial it's gonna be later in your life, because then you can take advantage of compounding, which Einstein and Warren Buffet said is the ninth wonder of the world.
I learned some basic things about that and needed to get started. And of course, the earlier that you start then the sooner than you can make mistakes, you can learn from those mistakes, you have a much higher risk tolerance because a mistake that you might make is not gonna be as costly as opposed to if you're in your 30's or 40's or 50's or 60's, where you gotta be a little bit more cautious and conservative in your investment strategy.
- Pay Yourself First So I was 18 years old, the first book that I read on investing was basically taught the principles of paying yourself first. First and foremost, the number one rule, the most important thing is to pay yourself first, and to invest on a monthly basis, an ongoing basis.
So that you can take advantage of what is called dollar cost averaging and have your investments and your money compound over a period of time. And I'm gonna explain a little bit what I mean about those, but just to go back to my story.
I'm gonna share with you some just very basic principles that are really important for you to understand. Now the first and most important thing is to pay yourself first. And that's the first thing that you're gonna learn in any investment book or any financial book out there, because you need money to invest. You need money that you can put aside to save or invest or whatever it is.
And if you don't have that, if you can't take a percentage of what you make and put that aside, then there's no hope for you to be able to grow your net worth and be able to make more money. And so, whatever amount of money that you're making right now, whether it's a $1,000 a month, $2,000 a month, $5,000, $10,000, or more, you've gotta make a decision.
The most important financial decision of your life, which is that you're gonna take a percentage of what you make, and I recommend 10% at minimum, take 10% and you're gonna put that aside and pay yourself first, you're gonna put it in a savings account, or an investment account, or some other account that you're not gonna touch. Very important, okay.
Now, you might be saying, well I don't have the money to do this, I live month to month. Well, maybe the step before that, that's actually even more important, is you gotta manage your money, you gotta manage your finances, and you gotta pay attention to it on a weekly and a monthly basis.
Because you should never be in a position where you're living month to month. That's a horrible position to be in, that position means that you're never gonna be able to get ahead in your life. Because living month to month basically means that your expenses are here and your income is here. And so, whatever income that you're making is going right towards your expenses.
And the only other options to be able to pay yourself is either you need to make more money and keep your expenses where they're at, so make more so that you have a positive cash flow that you can then take that money and pay yourself first. Or you've got to lower your expenses. Now for most people, the best thing to do is to lower your expenses.
- Focus on Increasing income Real wealth is built and not wasted. The saving part only comes in AFTER you’ve maxed out the income and even then you should first figure out where to move that income next in order to generate new revenue, which this time maybe doesn’t come with a ceiling.
Every rich person out there is constantly bringing in more and more money. Why? You want to be rich NOW! Not when you’re in your 60s. Who cares you can buy your dream house when your body doesn’t allow you to go up the stairs anymore? Focus on income, not on saving!
Emergency Fund in case a disability happens, in case something happens to your business. Who knows what can happen, but you gotta have that emergency fund, very important. Next, once you have that emergency fund of three to six months, and if you wanna be more conservative, you could do more than that, if you're more risk tolerance, you could do less. But three months at minimum, important.
Investing in Yourself According to Warren Buffet the multi-billionaire investor, the best investment that you can make is not in real estate, not in stocks, not in your business, it's in yourself. That's the number one investment that you can make and by in yourself.
What I mean by that, is investing in your knowledge, developing your skills, your confidence, your beliefs, self-development, learning about finances, learning about business, learning about marketing, all the different skills. You gotta invest in yourself.
All the most successful people in the world all understand this. And the truth is, is that if you could invest in yourself, that's what's gonna bring you the highest return out of anything else, because if you continue down the path you are and you don't invest in yourself then you're gonna continue getting what you've always got.
And by investing in yourself, you're gonna be able to learn the skills, and the confidence, the habits, et cetera, that can help you make more money and make better decisions in your life, which are gonna make you a lot more money.
So for me, I realized this, I realized that I need to invest in books, number one, I needed to read. If you wanna earn more, you gotta learn more. So I started reading books, I just started studying. I started going to courses, and products, and video training, and audio training, and seminars, and coaches, et cetera to continuously develop myself. Very important, that's the most important thing. The second most important thing that I think that you're gonna get the best return from besides yourself, is your own business.
Now, a business is something that has a high potential for reward because you are in control of the business. In fact, it's directly related to you. The more that you improve yourself, the more that your business will succeed. And you always wanna bet on yourself more than anyone else. So, betting on yourself, investing money in a business, whether it's an online business, or whatever it is.
- Do not crazy on diversification Here’s another secret of the rich: it’s hard to hold too many baskets! Throughout the years there’s been this false impression that the more diversified you are the safer your wealth is. This entire premise is false. Why? Money needs to be overlooked, it needs to circulate, rotate, redistribute and you can’t be a master of that many trades. Rich people on average have their earnings split into 3 separate wealth pools, in some very special cases, a maximum of 5.
The most successful entrepreneur of our time, Elon Musk is barely able to keep 4 companies going, without any other backup plan, because it would require too much of his time. The richest man in the world has 3, amazon, blue origin and more recently the Washington Post - which to be honest was more like a passion project.
Why don’t rich people diversify more?
Simply put, it’s because in order for something to perform incredibly well in the market it needs professional oversight. Yes, some people have successfully hired others to take over for them, but that only happens in low volatility industries.
When you know you’re the best CEO for the company that you built, you have the vision where it should go, it’s like shooting your company in the foot by bringing someone else. See what happened with Apple, when they brought in the CEO from Pepsi and fired Steve.
The most common segments of diversification are as follows, Business, Real estate & Land, Stocks & Funds
- Stock, Indexs Fund, and Mutual Fund For me personally, I like stocks, primarily, index funds is great. In fact, Warren Buffet, that's his advice for most, is to invest in an index fund. An index fund is basically a stock or a mutual fund that has very low fees, like ridiculously low fees, but it's basically owning a segment of a market.
So for example, there's index funds that you can own, the S&P 500, which is the United States, the top 500 companies in the United States. So you can own an index that's diversified and owning a piece of all 500 of those companies. You can own an index fund of the TSX, the Toronto Stock Exchange, that will own the top companies that are in Canada.
You can own index funds that will own the whole world economy, or different markets. There's many different types of index funds that are out there. But index funds are great because as the economy goes up, your investment goes up, you make more money, when it goes down, it goes down.
Now when investing, the best advice that I have also is to invest long-term. Have the long-term mentality, don't be caught up in the whole get rich quick mentality because that's what's gonna lead you to making a lot of bad decisions and you're gonna get into trouble. I believe in investing long-term and so investments that I make, I invest in businesses and stocks that long-term are gonna have a positive return, a positive yield. And depending on how old you are, if you're watching this and you're less than 40 years, you have a lot of time on your hands.
And so for me, when I invest in index funds or other stocks, it's gonna go up and it's gonna go down, but I actually enjoy it when it goes down. Going down is a good thing if you're investing in index funds or if you're investing in blue chip companies or stocks that are very secure, because when things go down, that's an opportunity for you to buy more at a discount. Buy more shares because, the economy always recovers, recessions, depressions, they always recover. I like to invest to get a passive income, specifically in dividends. I personally don't enjoy mutual funds as much, even though I still do own one.
Invest in things you know Only invest in things you know better than everyone else, otherwise, you’re gonna go from one loss to the next. The rich don’t chase the new shiny thing every month, instead, they keep drilling down on one thing until they master it and make sure to leverage this competitive advantage in order to cash in. If you know cars, do cars. If you know social media, do social media. Invest only in things you understand! And thanks to the technology gods, there’s never been easier to break from anonymity than it is today. You have access to billions of people all logged in into social media platforms just waiting to be introduced to you.
Look forward to the next financial crisis How many of you vividly remember the financial collapse of 2007? Who lost the most money then? Do you think the rich did? Nope, it was actually the poor and middle class. The banks got away unscathed. The government bailed them out. They simply printed more money and returned to business as usual, while everybody else lost almost everything.
The valuable thing about market corrections is that it serves as a cleanser for the marketplace. It gets rid of the pretenders. Meanwhile, the rich are patiently waiting with their wallets out for the next collapse. Why? That’s their version of Black Friday. Buildings, land, raw resources and companies at a fraction of the cost.They buy things that have intrinsic value.
Let’s take land for example, the fact that you can purchase a part of the surface of the earth which could remain in your family indefinitely and be monetized throughout time in different forms is mindblowing. The fact that you can get a discount on that should give you a better understanding of how the rich look at financial crisis.
- Summary So I know I've kind of sprinkled a lot of different advice here for you, but just to kind of recap, pay yourself first, 10% ideally, invest in yourself, make sure that you have a good savings of three to six months, your expenses, invest in a business if you have one, or other people's businesses, stocks, explore the different opportunities, invest long-term, invest in things you know, do not over diversification. Thank You