Transcription
In this video, I'm going to help you invest your first money into the stock market, and I'll take you through step by step exactly what you need to do. I wish I'd known all of this when I started more than a decade ago, and honestly believe that it's easier to invest today than it's ever been before.
Now, I'm sure you might know this already, but investing your money is really important, as if you don't do it, you'll end up losing money over time. Let me show you what has happened to cash and investments over the last 100 years. On screen now, you can see the average return that you would have received each year, depending on what you're investing in. As you can see, cash savings perform the worst of all of these, and it's especially bad once you take inflation into account. UK stocks did a bit better and managed to get you 5.35% after inflation, but the US took the crown and has managed a whopping 6.7% after inflation.
To put this into perspective, here's what you might have seen if you'd put £10,000 into a cash savings account compared to investing it instead. Assuming we left that money for 30 years and did nothing with it, we ended up with just £12,981 in cash. It's done virtually nothing in real terms, so good luck finally putting down money for that house deposit. Now, with investing that money instead, here's the difference that should make you sit up and pay attention. After 30 years of investing, we got £69,9973. We never had to look at our account, and it's gained more than five times the amount.
There will be so many people in the UK who have done nothing with their money and not invested it. I'm not surprised, really, when nobody teaches you anything about investing at all. Now, it's worth saying now that it's not a smooth ride, and investing is a lot more of a roller coaster when it comes to saving money. Although the average number is great, almost no year looks average. Here are the returns of the US Stock Market for almost the last 100 years. As you can see, there's been a lot more good years compared to the bad years. However, there have been plenty of times when it's gone down quite a lot, and multiple times when it's dropped over more than one year. The average is still excellent, though, but I did just want to remind you all that investing is never going to be an easy ride. The longer you can do this for, the more likely you are to do well, but just remember to be careful.
Anyway, with that said, how do we even know what to invest in? Let me say this now: that to be a successful investor, you need to know almost nothing at all about individual companies and the stock market itself. It sounds crazy, but think of it like this: you can be a very good driver and still have no idea how an engine gets put together. And even if you know how a car works in huge detail, it doesn't automatically make you a good driver. I used to think that to invest, you needed to be rich, or somehow you needed to be some kind of genius who knew all about finance. I imagined some kind of Wolf of Wall Street character with multiple screens with different charts, buying and selling all the time, but that couldn't be further from the truth.
To get those returns I showed you earlier, all you need to know about is something called an index fund. Sometimes you might see these referred to as ETFs or tracker funds, but basically, these investments let you buy loads of companies all in one place. You don't need to pick and choose which companies to buy; you can just buy hundreds or even thousands of them in one single investment. I'll show you some examples in just a moment when I show you how to open an investing account, but just know that these can come in all shapes and sizes. I have most of my own investments in index funds, and I'll be continuing to do this for many decades ahead. They're cheap to own, they're well diversified, and the best thing is that most professionals out there cannot even beat the returns that they can get. For example, if you buy an index fund that tracks the world, you end up with most of your money in the largest companies in the world. At the time of making this video, for every £100 that you would put into a fund like this one on screen now, here's where your money will be going.
The best way to describe them without going into too much nerdy detail is this: buying an index fund is like buying the whole haystack rather than trying to spend all your time finding the needle in the haystack. With the right index fund, you own all of the best companies and biggest companies in the world, meaning that you'll get the benefits if they do well. Now, very few companies do really well. Think of Apple, Nvidia, and Microsoft like the needles in the haystack. For every company like Nvidia, there are hundreds, if not thousands, of others that never gave you any returns or ended up bankrupt along the way. You're very welcome to try and guess which companies will end up giving you the best returns in the long run, but history shows us that very few people have ever gotten this right.
Once we get to the live demo, I'll show you an example of some really popular and cheap index funds that you can use as a starting point. Right, we've covered the super basic parts of investing. Let me show you exactly how to invest and get you set up with the right account. I'm going to use Trading 212 for my demo here. It's a company I've used personally for years, and I've got a Stocks and Shares ISA here, as well as my emergency fund earning me interest. I do also use other platforms, and you can do what I'm going to show you in similar ways on others. Now, feel free to check out a guide I did last year on the best places to invest and the best Stocks and Shares ISAs.
Now, to get you started, it's pretty simple. You can download the Trading 212 app from your app store, or you can follow the link in the description and get yourself signed up. If you use the link in the description, you'll get a free fractional share worth up to £100 once you sign up and deposit at least £1 into your account. I'll also show you another way to get your free share just in case it doesn't work in just a moment. Anyway, it's all pretty straightforward here: the usual details, ID verification, and then once you've passed all of that stuff, you'll need to decide what type of account you want. For us here in the UK, you're going to want to use the Stocks ISA. This is a type of account that not only lets us invest but it also protects us from any taxes. If you didn't already know, the Stocks and Shares ISA is a type of account that allows every UK adult to invest up to £20,000 per tax year completely tax-free. I've done a more in-depth guide on my channel if you want more details, but for now, you can go into that account and make your first ever investment, which is the exciting part.
Now, first things first, you'll need to deposit some money to make that investment, and this will secure your free share as well. You've got a few options when it comes to getting money into your account to do that. All you need to do is press the three-line button in the bottom right of the app, and then you'll see a big blue logo with "Deposit Funds." Once you've pressed that, you'll then have the following options: you've got the instant bank transfer, a normal bank transfer, as well as card and Apple Pay options. Instant bank transfer is always my preferred way, as it's free and instant. You just connect this with your bank, choose what you want to add to your account, and you're good to go. If you do want to use Apple Pay or a debit card, this is also free, but as you can see, after £2,000 in total, you will get charged a 0.7% fee, so just be aware of this. There shouldn't really be any reason to cost yourself any money at all when adding money into your account.
Now, once you've added money, you might see your free fractional share appear, so long as you deposit at least £1. Fingers crossed you get a good one. As I said earlier, if you don't get your free share, or you signed up to an account within 10 days and never used anyone else's link, you can click on the three lines again, go to "Use Promo Code," and then type in "Toby" just to make sure it all worked.
Once money is in your account, you now get to choose what to invest in. This part is completely up to you, and it could be as complicated or as simple as you want to make it, but let me just try and give you a pointer of where you might start. This is how I would do things if I was starting all over again today. As I mentioned earlier, index funds are a type of investment that lets you own hundreds or even thousands of companies all from a single place. The Trading 212 app actually has a section here with some of the most popular ETFs, and virtually all of them are passive index funds. For me, I prefer to own as much of the world as possible, almost going back to that needle in the haystack story. So let me give you a couple of options to look into.
The most popular global fund is this one here: Vanguard's FTSE All-World ETF. You can find it as well using another method if you just type in VWP. And a second option is this one here: Invesco's FTSE All-World ETF. They both follow the same index, which means they both own stocks from all over the world. The Invesco one is slightly cheaper; it has fees of 0.15% a year compared to the Vanguard fund, which is 0.22% a year. However, the Vanguard fund has more companies in it, 3,678, when compared to the Invesco fund, 2,394, at least at the time I'm recording the video. It's always up to you on which one you like; just do some research and decide for yourself. I'll be making more videos to help you do this, so keep an eye on the playlist on my channel that I'll be calling something like "Investing For Beginners 2025."
Now, once you've got the fund you like, it's so easy to make the investment. You just find the fund you like on Trading 212. So you go to the magnifying glass here on the app, you search for the fund, click the one you like, and then you can buy as much or as little as you like. You go to "Order," then "Review Order," and then finally, you can "Send Order" once you're happy. If you do this during Monday to Friday when the stock market is open, the order will get filled almost immediately. If you do this in the evening or the weekend, the order will get queued for when the stock market is open. If you're interested in the details, here are the times that the UK stock market is open, and here are the times of the US Stock Market if you're buying those individual US shares.
Anyway, just like that, you are now the owner of thousands of companies like Apple, Nvidia, Microsoft, Meta, and Amazon. You're an investor. Now, give yourself a pat on the back, have a cup of tea, and a quick lie down. Something that you thought was scary, complicated, and confusing not too long ago is, I hope, at least a little bit easier.
Anyway, now comes the hard part, but let me give you some help. This is a bit where most people give up and end up costing themselves in the long run. Investing is not something you do once and forget about. If you want to succeed, then you'll need to do this regularly and stick with it for many years. If anything, investing is quite boring, really. You might just invest in this same fund every single month for years with however much you can afford, and hopefully, you'll enjoy some success as the market grows. Obviously, there is absolutely no guarantee what will happen, but if you do stick with it long enough, you're giving yourself the absolute best chance possible.
Just on that note, if you do want to set things up in your account so that every month, week, or even every day you get money invested, you can turn on something called "Auto-Invest." This is how I have things set up with most of my investing. To do this on Trading 212, you just select the portfolio icon here, then choose "Add Pie." You can create a custom one very, very easily. You'll add in the fund or funds you want, or even individual shares, choose the percentage you want if there is more than one, choose "Auto-Invest," and then you'll decide if you want to put money in upfront. Choose what kind of recurring payment you want, for example, this could be the first of every month, name your pie, and then you're pretty much done. Or, if you want to be really lazy, I've actually made a pie for you, and you can just copy mine. I'll leave a link in the description below for you. I've called it "Own the World," and this is just a single global fund that I mentioned earlier. As I've said before, though, please do your own research and make sure that you invest in whatever works for you. Please don't just copy anyone without really knowing what you're doing. I'm just trying to give you a starting point here and keep things as simple as possible. You can then make things as complicated if you really want to.
Anyway, with that done, you're now well on your way, and the harder bit begins of making sure that you stay investing even when times get tough. You see, actually getting started investing is not the hard part, as I've showed in this video. Staying invested and doing this every time you get paid, especially if the market crashes, is going to be the really tough part. For example, if you looked at the US Stock Market between 1999 and 2013, you'll see that it went through two major crashes. You had the Dot-com bubble in the year 2000, and then you had the Global Financial Crisis in 2008. If I showed you this chart and told you that investing was something that you needed to do with your money, you'd probably think twice and run far away.
However, here is where the really hard bit comes in. Let's imagine you did actually start investing right before the crash, as you didn't want to miss out on the market and you saw all of your friends around you making money. If you put in, say, £300 a month, just as an example, and during this entire period, you didn't stop, you just kept buying into an index fund like we've talked about in this video, here's what you would have actually made. As you can see on screen now, during that time frame, your account will be worth over £100,000. This is only possible because you were buying when things were good and when things were really terrible. This is just so important to do if you really want to be a long-term investor. You can't enjoy the great returns of the stock market if you just buy when everyone else is excited. You also have to be the person that buys even when everyone around you is saying to get out. It's way easier said than done, and I still believe that most people are going to get this part wrong forever, but at least I can say I told you so.
You might even find that never looking at your balance in your app is the best strategy. The value of your investments is only really valuable when you come to sell them, and anytime before that day, it's just a number on a screen. It's either going to make you excited or make you depressed. Anyway, just remember this when times get tough, as although things are good at the moment, it's just a matter of time before the stock market has some kind of crash or correction. It's really up to you to take advantage of that or you sell out and lose money. Whatever happens, I'll be with you along the way, and you can always follow my regular portfolio updates on my channel for an update of what's happening in the stock market.
Anyway, for now, those are the absolute basics. And if you want to go into the details, keep an eye out for many more "Investing For Beginners" videos on my channel. At this point, I hope you've now realized that investing is not as complicated as people like to make out, and you can absolutely do it yourself. By getting yourself started investing, you're already ahead of more than 90% of people in the UK who don't even have a Stocks and Shares ISA account. Crazy, isn't it? Anyway, I'll see you in the next video. Happy investing.