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This Is How To Become A Millionaire: Index Fund Investing for Beginners - YouTube
Channel: Mark Tilbury
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hi guys it's mark so did you know if you
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save 200
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per month at an 8 annual return then in
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45 years
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you would have over wait for it
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one million dollars to be honest when
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someone first explained this was
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possible by investing in index funds
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i hardly understood a word they were
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saying it was like they would speak in a
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different language
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today i thought it was about time that i
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made the video that i wish i'd seen when
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i was younger
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and explain everything step by step and
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because i like people that actually
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practice what they preach
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i'm going to be investing ten thousand
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dollars of my own money
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during this video so you can see exactly
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how it's done just a quick disclaimer
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though
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i'm not a financial advisor i'm a
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businessman and this is
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just some of the real life strategies
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that have worked for me personally i
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always thought of index funds as my
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backup plan if my businesses hadn't been
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successful then i would have become a
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millionaire anyway through these
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investments
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just remember if you like the video then
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smash the like button as it really helps
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push this video out to more people
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and also consider subscribing if you
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want to grow your wealth part one
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uncovering the lies so let's cut to the
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chase you've been put a major
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disadvantage
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people have been telling you lies about
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investing all of your life for instance
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at school when i was growing up i
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remember asking my teachers about
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investing
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and they always said it's just for rich
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people as they can afford to hire
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professionals to do it for them for the
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longest time i believed investing wasn't
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for me because i wasn't a pro
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and i didn't have much money and i
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thought i wouldn't stand a chance
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then we got friends one of mine said i'd
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have to look at all the financial
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newspapers
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learn how to read the charts and
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according to him it just wasn't worth my
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time
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and on top of this every time i
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mentioned investing to my family they
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seemed so
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scared because they thought it's the
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most risky thing in the world and not
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for normal people
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my dad even said if i started investing
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i'd lose all my money can you believe
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that these lies are exactly what the
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experts want you to believe as they know
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that index fund investing is extremely
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easy to do
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you don't need much money to start the
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risks are pretty low
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and on average it will make you more
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money in the long term
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the dark truth is that the average
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actively managed fund returns two
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percent less a year than the market in
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general
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this means that professionals on average
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are doing worse than
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index funds and even if they end up
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losing you money
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they still charge you fees no matter
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what now according to my favorite film
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the matrix
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you have now taken the red pill and
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you've woken up to the truth it's now
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time to move on to part two
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understanding the game i know when i
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first started investing i
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felt like i was going to make so many
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mistakes but once you understand their
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language
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it all becomes so much easier and that's
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what we're going to be talking about in
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this part
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so i've been banging on about index
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funds in many of my videos so i think
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it's about time i explained
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what they are and why they're so cool
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i'm a big football fan and
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if you have ever followed any sports
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you'll be familiar with a league table
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like this
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the better your team performs the higher
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up they'll be on the list
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but on the other hand if they do really
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badly they might be removed from the
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league entirely this is almost exactly
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the same as an index
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all you have to do is switch out the
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teams for companies let's take the s
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p 500 for example this is a list of the
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500
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best performing public companies in the
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usa the big dogs being
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amazon google apple and more recently
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tesla
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and just like a league table if a
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company doesn't perform well
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they're at risk of being removed from
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the list hasta la vista
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baby the idea of an index fund is to be
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a little bit sneaky as it allows you to
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invest in every single company on the
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list
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with just one click it's a bit like a
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friend of mine who picks a different
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football team
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each year he just wants to pick the
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winner every time so investing in index
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funds means that even if a few companies
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do terribly then it's balanced out by
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the companies that are doing extremely
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well
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the average return on the s p 500 over
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the last 10 years has been
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13.6 now that is higher than usual but
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get this
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no one has ever lost any money if
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they've bought and held an
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s p 500 index fund for more than 20
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years so if this is so foolproof then
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why do people still buy individual
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stocks
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well personally i like to do this just
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for a bit of fun
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i also think that some companies are
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currently working on awesome technology
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for the future
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but aren't making a lot of money at the
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moment so they won't make the cut into
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the popular index funds so now and again
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i like to invest some extra money into
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these up and coming companies so i don't
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miss out and that reminds me we
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are currently giving away four free
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individual stocks if you want to pick
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them up
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i'll leave the link in the description
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and for everyone that's outside of the
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usa or china
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i'll leave a link where you can claim a
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free stock with trade in two one two
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hey that's pretty good you'll often hear
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people throwing around the terms roth
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ira
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in the usa stocks and shares isa in the
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uk
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tfsa in canada and supers in australia
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but what does it all mean well these are
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types of accounts that allow you to earn
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profits on your investments
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and you don't have to pay any taxes on
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them but they generally have limits
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because they're just
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so powerful these are kind of like
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captain america shield
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so let me explain if captain america
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just sat at home with his shield then he
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wouldn't ever get anything done
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but when he takes that shield into
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battle he has an advantage so these
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accounts are like your shield
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make sure to use them when you're
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investing a way you can do this is by
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using the money inside your shielded
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account to invest into index funds and
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all the profits will be yours because
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the government won't take a cup
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one of my biggest questions when i first
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started was should i invest
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all my money at the same time or do it
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gradually
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now this is something lots of investors
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argue about so i'm going to give you my
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view on things remember later i'm going
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to be investing this 10 000
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in full so that kind of gives you an
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idea of what i believe investing all
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your money as a lump sum is certainly
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more risky however if i'm investing in
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something i know will increase over time
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like an s p 500 index fund then there is
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no point
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waiting the longer you wait the worse
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off on average you'll be
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however if you don't have the cash i
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wouldn't wait to save up the money
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i would just invest what i could every
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month as sometimes you're going to buy
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when a stocks high
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other times you're going to buy when the
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stock's low but overall this is going to
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balance out
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and this is known as dollar cost
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averaging when you log on to an
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investing website or app
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you'll see that there is something
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called etfs which are very similar to
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index funds and a lot
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of people get them confused both allow
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you to invest into a basket of stocks
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however
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the easy way to remember the difference
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is just to think of what etf stands for
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exchange traded fund if we break that
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down simply it just means that it can be
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traded on the stock market throughout
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the day
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whereas an index fund can only be bought
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and sold for a price that is set
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at the end of each trading day but let's
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cut to the chase you probably want to
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know which one's better on average if
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you're starting with little money then
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etfs may be a better option as they have
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lower minimum
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investment thresholds and many brokers
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don't charge a trading commission now if
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you're still watching this and you're
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younger than 18
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then i am really impressed that you've
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been listening to a boomer like me for
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so long but seriously not many people
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learn this at such a young age as they
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don't teach it at school a way you can
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start investing in under 18 is to open
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up a custodial account in the usa
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or a junior stocks and shares iso in the
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uk
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set up these accounts you just need to
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ask your parents the real secret
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ingredient to this millionaire formula
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is
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time and when you're younger you have so
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much of it that's because
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every year as you keep adding to your
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investments the interest starts to
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compound and grow
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at a rapid pace it's a snowball effect
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once you reach a certain tipping point
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the interest you're making is much more
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than the amount you're investing on a
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monthly basis
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it's a bit like when you see someone
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take ages to get to a hundred thousand
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subscribers on youtube
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and then within a few months they
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managed to hit the big million
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the sooner you get started the better as
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time will be on your side
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now i want to clear something up when
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people talk about index funds you will
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hear
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s p 500 again and again people just love
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it as i mentioned before this is a top
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500 public companies in the usa
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but the cool thing is you don't actually
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have to be in the usa to invest in this
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i'm in the uk and it's one of my
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favorite investments i just love to
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think that i own a small part of
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all the biggest companies in the usa
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part three
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mastering the strategy so lots of people
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will teach you what to do but they won't
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actually say how to do it
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so i'm gonna walk you through everything
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right now while i invest my own ten
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thousand dollars the first thing to
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really do is to work out your goals
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let's say you want to become a
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millionaire that was one of my goals
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i just had to work out how much i would
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actually need to invest per month to
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achieve this
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i love using these compound interest
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calculators you can find them online
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easily yourself if you want to have a go
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at this so if you're able to invest 250
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dollars per
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month with an 8 annual return
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over 42 years you'll have over a million
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dollars in your account
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now if you're able to invest that for
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another 10 years you'll have over 2
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million in your account of course if you
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wanted to invest even more
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then you're just going to speed up the
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whole process the next thing we need to
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do is pick the brokerage website we're
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using to set up our account
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and invest the ones that i love are
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charles swab fidelity
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and vanguard i call these the big three
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the founder of vanguard john bogle is
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often referred to as the father of index
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fund investing and if you think i'm a
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boomer he was even older than me
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his vanguard group gave birth to index
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funds so they're the oldest and most
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trusted
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let's jump onto their website to see
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what they have to offer so to get onto
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their full list of funds just go up to
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invest in and click on vanguard mutual
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funds
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at this point i'm going to have to ask
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you to strap in and brace yourself
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because if you haven't seen this page
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before it can look extremely
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overwhelming
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but in a minute you'll be able to
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impress all your friends when you know
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exactly how to read it see what i mean
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there are just so many options
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the main things to focus on are the
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expense ratio
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which is how much they're going to
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charge you per year you obviously want
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to keep these as low as possible and
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luckily with vanguard fees these are
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very low anyway the other thing to look
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at is the average returns
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and they break these down nicely on the
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right hand side of the screen but of
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course it's always good to remember that
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past performance doesn't always mean
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future returns
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my wife's a bit like vanguard she likes
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everything in order and nothing
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out of place so they have arranged all
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of their funds into different categories
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so everything is easy to find
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category one is bonds these are a type
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of contract that companies and
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governments sell when they need extra
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money
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if you invest in these they promise to
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pay you back in the future
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these are often seen as pretty low risk
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but also pretty low returns therefore
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the older you are the more bonds you
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should have in your portfolio number two
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is balance funds
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the idea of these is to pick the age at
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which you wish to retire and they'll do
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all the rest of the work for you and
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find the right mix of index funds as you
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can see these go up in five year
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intervals and you can pick whichever
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suits your plans best this could be a
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good option if you wanted to invest
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without thinking about it too much
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but personally i always prefer manually
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investing
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it's a bit like driving an automatic car
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that does all the work for you
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it just isn't as much fun as a stick
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shift number three is company location
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and size
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known as small medium and large cap here
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you can find v
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fix which tracks our old friend the s p
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500 this little s means it's one of
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vanguard selected funds which they
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recommend
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if you click on it you're able to see
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exactly what companies you would be
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investing in and also
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the risk level vt sacs is another good
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one which is a total stock market index
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fund which has
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over 3586 different stocks this allows
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you to invest in the entire usa stock
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market in one
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click there is a minimum investment of
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three thousand dollars again but as
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before
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there's also an etf version with no
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minimum called
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vti then you have international stocks
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quite a cool one is emerging markets
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which invest in companies based in china
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taiwan india and many more but as you
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can see this is a five on the risk scale
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so i wouldn't personally invest a lot of
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money into this fund because look at me
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i'm a bit old to be taking too many risk
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and i need to sleep at night
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number four the last category is sector
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based so if you have a particular
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interest in energy health care or real
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estate
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you can invest into these sectors and
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there are also a lot more options for
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sector investing in the etf so now we've
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broken down what's on offer hopefully it
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all looks a bit more understandable
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now for the moment you've all been
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waiting for it's time
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to invest my ten thousand dollars i
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could split this between lots of
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different funds but personally i like to
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invest the majority of my money into
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american companies
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i would say probably about 70 percent
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american
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20 in other countries including the uk
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and 10
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in some bonds i like to keep the bonds
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quite low as i don't mind this little
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extra bit of risk because i'm only 53
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and i have a bit of time before i've got
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to rebalance my portfolio to secure my
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investments but that's a personal choice
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depending on your risk tolerance the
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funds that are available are different
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in
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every country but the indexes they track
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are very similar
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so you may need to invest in a different
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fund to me but obviously you can still
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use my percentages as a guide so i'm
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going to use the uk
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vanguard site to invest 5k straight into
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this etf that tracks the s
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p 500 so here we go
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all done two thousand dollars is going
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into an index fund that tracks the total
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american stock market so again
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we go on the screen click so far that's
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70 percent
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invested in the biggest economy in the
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world which of course is
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the usa now i like to balance this out
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by investing in a different economy
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as i live back in my own country i'm
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going to be putting 2k
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into the ftse 100 index fund so looking
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good
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all done great now i've invested 90 of
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my 10k
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and i'd like a bit of security let's
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just put the remaining 1k
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into a global bonds index fund and let's
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just do that
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so just like that i've invested in the
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usa companies like apple
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amazon tesla and google i own a small
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piece of the biggest companies in the uk
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like
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hsbc bp and unilever
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and i have some bonds to balance out my
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portfolio it really is
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as easy as that so i'm going to leave
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the next video up here but don't click
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on it just yet remember to subscribe to
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the channel if you want to grow your
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wealth
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ring that notification bell and smash
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that like button
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okay i'll see you on the other side
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