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THE ONLY STOCK YOU NEED TO INVEST IN 2022 - VTI and Index Funds - YouTube
Channel: Sean Lei on Investing
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this video is part of an investment
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series I'd recommend you start at the
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very beginning I'll leave a link in the
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description below if you just want to
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take a simple stock symbol which is the
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abbreviation you need to use to actually
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buy the stock then you can skip to this
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part of the video here but I highly
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recommend you watch this video all the
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way through because it's important to
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understand why the stock is so dang
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powerful I'm sure on a computer
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scientist working in AI with a passion
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for investing and in this video you will
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learn the one stock you ever need to
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invest in before we dive into the best
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stock you should invest in let's quickly
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go over what a stock is a stock as an
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investment that represents an ownership
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of a company if you buy a stock at a
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certain price these price of that stock
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goes up and you sell at that higher
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price than you just profited the stock
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market is one of the best places to
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invest hands down the market always goes
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up time and time again even through all
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of the economic disasters and dips the
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market relentlessly goes up but even
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though the market generally goes up
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people lose money on the stock market
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why is that mistake number one is that
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people try to time the market they sell
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when they are panicking and so they sell
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low and then people generally buy when
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the markets are high stable and story
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that's just how it works we feel more
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confident buying investments when times
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are great mistake number two is that we
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believe we can pick individual stocks
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everyone and their mother speculates on
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stocks they talk about the next biotech
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company that's going to cure cancer or
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the next weed company that's going to
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explode and while of course you do hear
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stories of people making hundreds of
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thousands of dollars speculating on
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stocks there are way more stories of
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people losing a ton of money your
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baseline that you should be comparing
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your growth to isn't 0% you should not
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be happy if you put in money into the
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stock market and you didn't lose or gain
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any money your baseline should actually
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be the growth of the stock market itself
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and decades over time the annualized
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return or the yearly return of the stock
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market has been about 10 to
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eleven percent 95 percent of financial
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professionals can't actually beat the
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stock market so what makes you any
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better now I'm not gonna lie when I
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first got started with investing I was
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investing in individual stocks and it
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was a ton of fun there were times when
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the companies I invested in were up and
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it's a huge rush trying to pick
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individual stocks is addicting kind of
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like cocaine
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however if investing in individual
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stocks is what gets someone interested
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and excited about investing I am all for
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it
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just take that money that you lose as
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the price of learning for me when I
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learned that 95 percent of investors who
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spend all day every day researching
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stocks can you Minh beat the market it
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really humbled me to add to this poor
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Warren Buffett he was deemed the most
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successful investor in the entire world
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Challenge 5 hedge fund managers over the
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course of 10 years had funds being an
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exclusive partnership of investors use
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complicated investing strategies to
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hopefully realize large capital gains
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these hedge funds take money borrow
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money charge fees and promise large
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profits the challenge started in 2008
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and the hedge funds took off at the
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beginning the hedge fund investment
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decisions were outpacing Warren
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Buffett's choice of investment but
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things didn't end up happily for the
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hedge fund the hedge funds picked
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individual stocks that they believed
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would grow way faster than the market
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and over the course of ten years the
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hedge funds averaged about a increase of
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36 percent Warren Buffett's Vick the SP
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500 index fund low-cost index fund just
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tracks the top largest companies within
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the US no more no less
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Buffett's investment grew a hundred
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twenty five point eight percent over the
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course of ten years what's the
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conclusion of Buffett's challenge
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you can't consistently pick winning
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stocks and if you are that anomaly that
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accomplishes this for 30 40 years you
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are a king wizard so what do we do if we
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shouldn't invest in individual stocks
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well we take Buffett's approach for the
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challenge and invest in low-cost index
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funds specifically what I'll be talking
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about in the rest of this video will be
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the total US stock market index
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what's in the total US stock market
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index fund every publicly traded company
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in the United States every US company
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that can be bought and sold on the stock
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market is in this fund and there are
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about 3,500 companies investors and
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financial advisors always mention the
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term diversification and in terms of
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investing in stocks you pretty much
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can't get any more diversified than this
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the reason why we diversify is because
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we don't want to have all of our eggs in
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one basket because if that basket tanks
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then we lose all of our money by
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diversifying spilling up our money
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across different areas in this case
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across a bunch of different companies
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then we were safe when sometimes
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companies go bankrupt or they lose in
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value while all the other companies can
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also grow as well
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therefore diversifying while still
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realizing gains diversification not only
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makes sense in a financial sense if
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we're investing but also when you're
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working out you don't want to just do
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that one exercise over and over again
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that it'll say body squats and that's
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the only exercise you do know you want
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to include some upper body some back
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some chest some other exercises that
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overall increase your bodily health with
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the total US stock market index fund
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there isn't an equal distribution of
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companies within the fund it is a market
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capitalization weighted fund which in
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simple terms means that the large US
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companies make up the majority of the
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fund the mid cap companies make up a
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minority of the fund and these small
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companies make up a tiny sliver and why
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does the incorporation of mid-sized
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small companies matter to you well for
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added diversification and on top of that
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because mid and small cap companies over
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the long time grow at a faster pace than
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large cap companies the fund also
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spreads across all sectors of the market
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including technology financials and
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health care on top of producing better
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results than 95% of financial
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professionals out there the fun almost
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takes no time at all and allows you to
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focus your time on other aspects of your
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life that make life more meaningful
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simplicity is something that you should
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not overlook investing doesn't have to
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be complicated and you don't need
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professional advice unless you're a
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money weirdo like me you're much better
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off spending your time
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elsewhere in fact the number one reason
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why people's investments are subpar is
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because they get involved
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the human factor takes part people
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speculate on individual stocks they try
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to time the market and they panic sell
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when times are tough fidelity is
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investment research firm did a study
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where the best performing investment
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accounts were from those people who had
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literally forgotten about their
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investments take the human influence out
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of investing having one fund you buy
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simplifies things significantly you can
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set up automatic contributions into
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investing account you can set up
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automatic purchases of a total US stock
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market index fund as well all you have
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to do is take a few minutes to set it up
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and you don't have to manage it for
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years and potentially decades I'm a huge
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advocate for creating a life around what
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you value and if managing money and
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dealing with all this personal finance
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stuff doesn't interest you then
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investing in this one index fund is the
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perfect choice for you
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low-cost index funds are way better than
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those expensive mutual funds
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you should be happy with the return of
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the stock market it's actually pretty
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great the only thing we can do on our
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part is to lower the fees associated
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with the fund a mutual fund will
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typically have a 1% fee this B helps pay
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for the fund management pay for
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expensive staff who does research on
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individual stocks and to pay for fund
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managers to fly out and meet company
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executives whereas a low-cost index fund
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will typically have a point zero three
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percent fee now 1% might not sound like
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a lot but compounded over decades will
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result in you having huge losses
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potentially hundreds of thousands of
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dollars keep expenses low now you might
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be wondering about international stocks
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like these Samsung's out there that you
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want to invest in there are three main
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reasons why you might not want to invest
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in international stocks one being
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there's added risk investing in a
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company with in a country with an
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unstable government has an added risk to
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it a country's economic development is
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closely tied to the country's government
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the second reason why you wouldn't want
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to invest in international stocks is
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because there's added expense now for
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funds that have international stocks
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though typically have
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expense ratios therefore cutting away at
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your profits and lastly within a u.s.
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total stock market index fund we already
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have international stocks think about
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the apples Google Facebook Coca Cola's
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these are all US companies but they
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expand across the entire world other up
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a chart where you can see the influence
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of these countries across the world
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almost half of their profits are from
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outside of the United States all right
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so we just learned a lot of reasons why
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this is the only stock we need to invest
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in so how do you actually purchase this
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stock here's what you need to know there
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are options from a lot of different
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investment companies and I'll go through
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several of them if you invest through
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Charles Schwab there's the Schwab total
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stock market index SW TSX with a point
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zero three percent expense ratio this
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expense ratio is the fee you pay
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annually if you invest through fidelity
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there's the fidelity zero total market
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index 1f z ro x with a zero percent
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expense ratio but you have to invest
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through fidelity if you invest in
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another platform such as Robin Hood MLM
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finance or weeble two options for you
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are the iShares core SP total US stock
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market ETF IT OT with a point zero three
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percent expense ratio and Vanguard's
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version vti which also has a point zero
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three percent expense ratio IT OT and
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VTI
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or ETFs that are bought like stocks so
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if you have enough money to buy one
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share of it then you can purchase it but
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if you're just a penny off then you
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can't purchase that share if you have
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three thousand dollars then you have the
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options to invest through Vanguard's
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fund BTS ax or V T Sachs this covers the
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same total stock market and has a point
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zero four percent expense ratio now this
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expense ratio is slightly higher than
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the points that are three of vti but
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allows you to fully invest all of your
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money meaning that if you have three
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thousand dollars you can vested three
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thousand dollars fully into the fund you
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will just have a fractional share of
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that fund it doesn't really matter which
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one you choose they all produce
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strikingly similar results which is no
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surprise because they all track the same
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index of the US
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total stock market while this is the
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only stock you really need to buy there
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is something that you should consider
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purchasing as you get closer and closer
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to retirement and that is bonds bonds
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are an investment option that are a lot
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more stable than socks but don't produce
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the same return as them so if you're a
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beginner investor you have a long time
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horizon before you retire you should go
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100 percent into stocks but this of
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course should be based on your own risk
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tolerance but as a beginner relatively
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young investor it's better to be
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aggressive and then become less
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aggressive by adding in bonds while you
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get closer in closer to retirement age
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in other words go full Sun on stocks pop
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the like button to support this channel
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hit the notification bellow so you know
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when the next investing video is up and
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I'll see you all in the comment section
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below
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