By the end of this video, you should know what type of investor you want to be and how to invest. 🎁ACORN FREE $5🎁 Link: https://acorns.com/invite/38EYSU
Basic idea: 3 types of investing - Active
- Passive
- Inactive
Make sure to stick to the end, because most people think that inactive investing is the best investment, but its really not, its worst.
1. Active Investing - Is what it sounds like - It's investing actively and trading frequently, usually buying and selling within a year - And someday traders even buy and sell every minute ( but around 80% of them lose money) – statistics don’t lie.
The truth: - Its harder: The main reason is that its impossible to predict the market short term and sometimes even long term Why? Because investments can be sold in seconds, so whenever people smell loses everyone sells, but whenever people think it's going up, everyone buys and the market become overvalued. - A good example is January
- Its more expensive: the government has this writing down as long term and short term investing: long term beyond one year, gets taxed at a maximum of 20%, sometimes 15% and sometimes 0, but the short term gets taxed as ordinary income.
- It's riskier: because of its short term, and things happen.
But: if you learn to invest inside out, how to analyze companies' financial statements, and understand the management at the company, and the brand they’ve built. ( then you can make a lot of money)
2. Passive investing - It's borning and its mentality training - The idea is to invest for the long term - I mean 10-40 years down the line - History shows the money will grow, and you invest into index funds then you’ll be more diversified
Pros:
- Less Risk - Less Expensive - More predictable:
Con
- Less money Short term ( because you’ll be growing at an average of 7% with index funds for example)
But: - If you learn how to analyze companies, study management and the brand they built - Well you can buy them for the long run ( but the risk is that the company might go bankrupt) - So to mediate the risk ( that’s why I invest into index funds its pull of companies, that way if one falls it doesn’t matter as much)
3. Inactive: - This is what 80% of people with a job that offers a 401k do - They hire a management company to manage their investments - For a small 1% of the portfolio per year
However: - 1% is a lot of money, and the math shows that ends up being almost 1/3rd of your profits
What to DO: - Get a self-directed 401k or Roth IRA ( this way there is no management fee) - Invest into some good index funds ( like vanguard s&p 500) - This way your money grows over time fee-free.
Why I like it: 0- The idea is: my money works for me 1- It grows with time 2- I get paid dividends 3- Eventually that dividends will match my normal income
