Transcription
Hey everyone, Stefan here from ProjectLifeMastery.com, and in this video, 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.
Now to give you guys an idea, I got started investing when I was 18 years old, and I'm now 30 years old today. At the time, I didn't know anything about investing, but I was reading these self-help books and I read some books on finances. 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 start investing, then the more beneficial it's gonna be later in your life, because then you can take advantage of compounding, which Einstein said is the ninth wonder of the world. All these investment gurus, including Warren Buffet, all talk about the power of compounding.
I learned some basic things about that, and so I knew at 18 years old, I needed to get started. And of course, the earlier that you start, then the sooner 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.
So I was 18 years old, the first book that I read on investing was called The Wealthy Barber by David Chilton. It's more of a book geared to Canadians, but it 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. This way, you can take advantage of what is called dollar cost averaging and have your investments and your money compound over a period of time.
I got started when I was 18. I started with about, I think $500 was my first investment in a mutual fund. It was actually the Bank of Montreal mutual fund here in Canada. I started putting aside $25 a month on a pre-authorized payment plan to constantly buy more shares of that fund on a monthly basis. I think maybe when I was 19 years old, I made a $5,000 investment into another mutual fund. I invested in a few other different things, and then I just kinda stopped.
I mean, I was always kind of putting money aside every month, paying myself first, but I didn't really do any active investing for a while. But I do remember a number of years ago, I bought Apple stock and I had a great return from that. I did buy Facebook when Facebook just went public a number of years ago, and I made some money from that. But at the time, I didn't have a lot of money to invest. I literally remember buying like $600 worth of shares of Facebook and $800 worth of shares in Apple, so even though I did make some good returns percentage-wise, the return was really only a couple hundred bucks or a thousand bucks or something like that.
Since then, to give you guys an idea, I've done very well with business, I've learned a lot more about investing. At 30 years old, I bought a real estate property a number of years ago, I think in 2013, that is a rental property that I rent out, and I make a little bit of passive income from that, as well as capital growth. I've also got an over $1.6 million investment portfolio of just stocks. I no longer invest in mutual funds. Actually, I do have one mutual fund still, but primarily a stock portfolio that consists of blue chip stocks, index funds, a variety of different sectors, a lot of dividend-paying stocks, some real estate investment trusts, bonds, and a number of different investments.
I've also invested in private businesses, and I've done loans as well. I'm gonna go over some of the strategies and just kind of give more basic advice. But I want to give you guys an idea that I started from nothing, and I've been able to build myself up to a millionaire today at 30 years old. So what I'm gonna share with you can definitely help you if you're just getting started. It can take time, of course, but I'm gonna share with you some very basic principles that are really important for you to understand.
Now, the first and most important thing is to pay yourself first. 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. 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.
So, whatever amount of money that you're making right now, whether it's $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 is that you're gonna take a percentage of what you make, and I recommend 10% at a 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.
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 that you've got to 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. Living month to month basically means that your expenses are here and your income is here. Whatever income that you're making is going right towards your expenses.
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. Cut down on your current living expenses. If you're living month to month, you can't afford to live the way that you're living. You're living beyond your means.
That's not smart financially. Most people that live in a house or they rent an apartment or rent something they can't afford. They have a car that they can't afford; they're buying food and luxuries that they can't afford. You've got to make a sacrifice. And this is coming from someone who was in debt at one point in my life. When I came to this realization, I had to make a sacrifice. I had to, for example, move back into my parents' house, or live with my friend on his couch for several months, or eat at home and not eat out as much, or take the bus and get rid of my car.
These are all sacrifices that you might need to make to bring down your expenses so that you have that positive cash flow. Very important. Look at your current lifestyle now. Look to see and set a budget for yourself that you're not gonna spend more than X amount of money. Anything in excess, you're gonna save that, and you're gonna pay yourself first. The reason why they say pay yourself first is 'cause you're supposed to pay yourself that money before anything else, before you pay your bills, your rent, or anything else. Okay, that's how important you have to make this.
So that's the first step; maybe I'll do another video that goes into managing money and financing, but you've gotta pay yourself first, 10%. I don't care if that's $100 a month, $25 a month, or $1,000 a month; you gotta make sure that you're doing that. To give you guys an idea, I started that way, but now because my business and my cash flow is really big, I'm able to pay myself like 80% of what I make just because I have low expenses and very high margins in my business. Therefore, I'm able to literally invest tens of thousands of dollars every month to grow more, my portfolio and everything like that.
You want to be in that position where you have positive cash flow, number one. Number two is you need to make sure that you have an emergency fund of savings. Very important. If you don't have that, then you're gonna be in trouble. Typically, what all the financial books say is you want to have at least three to six months of savings, which is typical of your expenses. So if your expenses every month are $2,000 a month, and by the way, you gotta know what those numbers are; you gotta know exactly what you're spending every month and what you're making every month. If you can't tell me those numbers, you're gonna be in financial trouble.
You've gotta know those numbers off the top of your head. So, if it's $2,000 a month, that's your expenses, then you need to put aside at least $6,000 to $12,000 in savings as an emergency in case something happens to your job, in case a disability happens, or 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 want to be more conservative, you could do more than that; if you're more risk-tolerant, you could do less. But three months at a minimum is important. Now once you've done that, you're gonna have extra positive cash flow where you're gonna be paying yourself, and you're gonna have that money go into savings. What do you do with that money? How do you invest it? Well, you gotta explore the different investments that exist.
Now, the number one investment that you can make—according to Warren Buffet, the multi-billionaire investor—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. By investing in yourself, what I mean 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 understand this. The truth is that if you 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. By investing in yourself, you're gonna be able to learn the skills, confidence, and habits, etc., that can help you make more money and make better decisions in your life, which are gonna make you a lot more money.
For me, I realized I need to invest in books, number one; I needed to read. If you want to earn more, you gotta learn more. So I started reading books, studying, going to courses, buying products, watching video training, listening to audio training, attending seminars, and hiring coaches to continuously develop myself. Very important. That's the most important thing.
The second most important thing that I think you're gonna get the best return from, besides yourself, is your own business. 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 your business will succeed. You always want to 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—has a higher potential for growth, and it's gonna be a lot less risky because you have more control over it as well.
So that might be getting started on an Amazon business, a publishing business, developing a blog and doing affiliate marketing, or creating your own products, apps, or software. Whatever that is, you're gonna need money to invest and build that and be able to market it. You want to have that advantage to be able to grow it. So that's the number two biggest investment that I believe that you can make.
For me, a lot of the money that I make, I put it in myself. I'm always going to seminars and courses. Even though I've made a lot of money, I'm still investing even more in myself. I have coaches, I read books, I do all that sort of stuff, continuously today. I invest in my business because my business is a seven-figure-a-year business that has the potential to grow even beyond that, and I'm gonna get the highest returns in my business. Very important.
The other options that you have would be stocks, real estate, investing privately in other businesses, loaning money, bonds—there's a lot of different investment vehicles out there. You can explore a number of the different ones. I'm not an expert on all of them, to be honest with you. I think your business is always the best because you know that the most, you understand it the most, whereas other investments you might not understand or know much about. But you want to explore different options.
For me personally, I like stocks primarily; index funds are 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, and basically owning a segment of a market. For example, there are index funds that you can own that track the S&P 500, which is the top 500 companies in the United States. You can own an index fund of the TSX, the Toronto Stock Exchange, that will own the top companies in Canada. You can own index funds that will own the whole world economy, or different markets, or bonds even.
There are many different types of index funds out there. Index funds are great because as the economy goes up, your investment goes up; when it goes down, it goes down. Now, when investing, the best advice that I have 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 getting into trouble.
I believe in investing long-term. The investments I make, I invest in businesses and stocks that long-term are gonna have a positive return. Depending on how old you are, if you're watching this and you're less than 40 years old or even 50 years old, you have a lot of time on your hands. You have the time to wait. 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 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. If you're owning index funds, for example, in 2008, when the recession happened, it was a great opportunity for you to buy more. If you were investing and buying a lot, if you owned an index fund or were buying a lot of stocks during that time, today you'd be worth a lot of money.
So, invest long-term; invest on a monthly basis as well. That's known as dollar cost averaging because the stock market is always volatile, with ups and downs, but if you invest every month, basically it's gonna even itself out. There are times where you're gonna buy high, and times you're gonna buy low, but overall, by investing and buying every month, the trend is always gonna go up, and it's always gonna be better off for you.
So, dollar cost averaging—investing every month—very important. Saving, paying yourself first every month, investing in yourself every month, whatever that might be. I personally prefer stocks. I enjoy them because they're very low maintenance. Index funds are pretty safe, low fees, and you can get dividends on index funds as well. This means that you can actually get paid a dividend either every month, every quarter, or every year, depending on what the payout is, so that's passive income.
You can also set up a lot of these investments and stocks on a DRIP, which means that when you get paid the dividend, it will automatically buy more shares for you. It's great because then you're buying more shares, and if you focus long-term, then you have the benefit of compounding over a long period of time. Now, index funds, I think, are a must for every portfolio.
Other options include owning blue-chip stocks. I like to own a lot of banks. I live in Canada, and I predominantly bet and invest in Canada, although I do some investments in the U.S. Banks are good; they pay good dividends here, and they're very secure. For example, the Bank of Montreal here in Canada has not missed a dividend payment in over 100 years. That's going through depressions and recessions, and the bank system is very secure here in Canada. There's no risk of them collapsing. If it goes down, great; I can buy more. It's gonna eventually go back up, anyway.
Real estate investment trusts (REITs) are something I like as well. Although I do own a real estate property, I'm not a big fan of owning real estate because there's more maintenance involved, and more problems happen. If you really want to scale it, you need a property manager, which you're gonna have to pay, usually 5% to 10% of whatever the rent is, just to manage the property for you. I've owned real estate now for three years, and I haven't really enjoyed it as much.
Whereas, a REIT means that I can own a company that owns real estate. I can invest in them to benefit from the real estate market, whether it goes up or down, and I can easily exit, whereas most real estate can be hard to get out of and liquidate. Plus, I can get paid a dividend from that as well, and I don't have to manage it.
So I enjoy REITs as well. I think learning the different sectors, the different models, and different vehicles is important. Reading books on that is very important as well. Index funds are the simplest advice I would give for beginners to get started with and do some research on those. Real estate is another thing as well—doing research on that. It's important to get started as soon as possible.
At times, you'll want to make sure that you're strategic about the investments that you're making, and you're not just buying real estate if the market's hot and it's not a good opportunity to do so. For example, right now in Vancouver, the real estate market's ridiculous. I personally would not buy right now; it just doesn't make any sense to. I'd much rather use that money to invest in stocks or other vehicles that exist out there as well.
I know I've sprinkled a lot of different advice here for you, but just to recap: pay yourself first—10% ideally—invest in yourself, make sure that you have a good savings of three to six months of your expenses, invest in a business if you have one, or other people's businesses, and explore the different opportunities.
Invest long-term. I like to invest to get passive income, specifically in dividends. I personally don't enjoy mutual funds as much, even though I still own one. A great book that can help you is Tony Robbins' book called Money: Master the Game, as well as the books by Robert Kiyosaki, such as Rich Dad, Poor Dad, and Cash Flow Quadrant. These are all great books that can help you understand this a little bit more.
I think these are the most important things, and you want to get yourself in a position where you have the money to invest. You don't need a lot of money to invest; I think that's a misconception as well. Just get started with a couple hundred bucks. Make sure that you build up that savings as well, and you manage your money, as that's really the most important thing.
If you don't do that, it doesn't matter how much money you have; if you can't manage it, then you're gonna lose it. You're gonna make a lot of poor decisions and make a lot of mistakes. To get started with stocks, there are trading accounts that you can set up. Most banks have their own trading accounts. Here in Canada, RBC and Scotia iTrade, RBC has Direct Investing, and then there's Questrade and a number of different ones out there. Usually, what they do is charge a fee based on the trade. For every trade that you make, they'll usually take maybe $20 or $10.
The more your portfolio grows, the cheaper it gets, or the more trading that you do on a regular basis, the cheaper it gets as well. If you're investing through a trading account, they'll take their fee based on each trade that you make.
Depending on where you live, this will be the last piece of advice that I’ll give you. You want to take advantage of any tax-deferral systems that you might have. For example, in Canada, we have what's called a TFSA—tax-free savings account. Right now, at the time of this video, you can put in $5,500 a year, and that will grow tax-free. It's very important to take advantage of that and max that out.
In the United States, you have different accounts like 401(k)s or IRAs, and all the different options available. I'm not totally familiar with what you have in the U.S., but make sure that you take advantage of that because that's also very important.
All right, so that's a lot of advice—a lot of beginner basic stuff for you guys. A little bit of the mindset, which is very important as well. Hopefully, this can help you get started investing. If you have questions, leave a comment below. I might do more videos on this subject as well. I have a great video that shares my million-dollar investment portfolio; I've grown it a lot since then.
But I'll probably do some more videos, as well as a video on managing your finances, because that's very important also. Make sure that you subscribe for more videos, hit the thumbs up button if you enjoyed this video, leave a comment below, and check out some of the links below as well because I have a lot of great resources that can help you invest in yourself and improve yourself, as well as build an online business, if you'd like, and invest in that to build that as well so that you can make passive income and make money that you can invest with.
Hopefully, you enjoyed this video. Thank you, guys, for watching. I'll see you in the next one! Take care!