00:00There are all sorts of investments that you can do from buying cryptocurrency, foreign exchange,
00:06real estate, buying wine, watches, even buying whiskey. Yet, buying whiskey is a real investment.
00:13I've never done it. I wouldn't be able to stop myself from drinking my investment, but
00:16fair play to anyone who can do this. In this video, however, we're going to cover investing
00:21in stocks and shares, and we'll go through three points. What are shares and how you can generate
00:26money from them? How do you get started with investing? And we'll also talk about whether
00:30it's better to buy an index fund versus individual shares. If you're like me, you're probably
00:36wondering, with all the news about high inflation, high costs of living, how do I generate more
00:41income? How do I grow my wealth? Well, the good news is anyone can get started with investing
00:45and with small amounts of money too. Part one, what are shares and how can you generate money
00:51from them? When you think of buying shares, you should basically think of buying a tiny
00:56piece of a company that is listed on a stock market. So these might be companies like Apple,
01:01Vodafone or Coca-Cola. Let's take a made up example. If a company is worth one million pounds
01:07and there are one million shares in that company, then each share is worth one pound. If you buy
01:12one share for one pound, then you actually own a tiny piece of that company. Now, there are two ways
01:19to invest in shares to generate money. The first is from equity growth, which is when the price of the
01:25shares increases to a higher value than the price you originally paid for them. So let's take an
01:30example. If you invest in 100 shares at one pound per share and the price per share increases to one
01:36pound 20, then your total return would be £120 on your original investment of £100. The second way
01:44to generate money from shares is from dividends. Dividends are a percentage of company profits which
01:50are returned to shareholders, typically paid either quarterly or annually. On the FTSE 100,
01:55for example, there are stocks which pay 8, 9 or even 10%. So if you invested £1,000, you could see
02:02returns of up to £100 per year. Not life-changing sums of money, and you can see you need to invest
02:07quite large amounts to get sizable returns back. But if you go in with the mindset of growing this over
02:13the long term, it can be a great way to add another income stream. Part two, how can you get started
02:18with investing in shares? So getting started is actually relatively easy. The first step is to
02:24set up a brokerage account, and there are lots to choose from. Harbury's Lansdowne is the largest
02:28platform, and you can buy individual shares. You can also buy into index funds. It allows you to set up
02:34a stocks and shares ISA, or a self-invested pension, SIPs, or a general trading account, which would be
02:40subject to tax. Vanguard is another one of the well-established platforms. So it has a variety
02:46of investment options and covers all the major stock markets. There's also a number of market
02:51disruptors, such as FreeTrade, which is an app-only investment platform, and also Trading212, which you
02:58can actually use fake money. So if you want to trial first and then build up confidence to start
03:03investing your own money, this would be another option. So I have Hargreaves Lansdowne, as I find it
03:08gives me the most options for the investments I want to do. But there are lots of options out there,
03:13and it's worth comparing the pros and cons and then deciding on the best one for you. Once you've
03:18signed up to an investment platform, the next step is picking the shares and investments that you want
03:23to make. Part three, what's best, buying index funds or buying individual shares? To physically buy stocks
03:30and shares is very easy on the platform, just with a few clicks. But before you do anything, you need to
03:36do quite a bit of analysis to make sure you pick the right stock. So such as looking at the company
03:40financial statements or understanding the wider macroeconomic or political changes that could
03:46impact the company's performance. Warren Buffett, a famous American investor with a net worth of over
03:51$100 billion, says he picks stocks by looking at companies with a competitive advantage over the
03:57long term. He says to use this technique instead of trying to predict where the stock market is going
04:02to go next, as there are so many variables which can impact it going up or down in the short term.
04:08Now, you might be thinking, I don't know where to start with finding a company with a competitive
04:11advantage, or I don't know how to read company financial statements, or even just this all feels
04:17like a lot of work when I've already got a full-time job. There is another option, a slightly easier one,
04:22and that is to buy into an index fund, which is managed by a fund manager. Think of an index fund as
04:28a basket of companies, and it helps to manage the ups and downs in performance. So for example,
04:34if Tesla's share price has come down because perhaps Elon Musk has done another one of his
04:40tweets, then if you've got also in your basket Apple shares, which might be doing well and going up,
04:46then that can help balance out the performance of your fund at a particular point and over time.
04:52You can buy index funds via a brokerage account such as Hargreaves Lansdowne, and there are
04:57lots of different funds to choose from in the UK, US and Asia. For example, for the UK,
05:03there are funds which track the FTSE 100, which is the top 100 companies. And similarly for the US,
05:09there are funds which track the S&P 500, which is the top 500 companies. Quite a few investors will say
05:16if you don't want to do the analysis and pick individual stocks, then you can invest in something
05:22like the S&P 500. Historically, it's grown on average at around 10%, which is pretty good going
05:28when you compare it to just leaving your money in a bank account and earning only just a few percentage
05:33in interest. One thing I will say is there's a lot of content online about investing or how to become
05:39a millionaire, but you shouldn't go into investing with a get rich quick mindset as I think you're
05:44probably more likely to lose money than you are to make money. Warren Buffett famously said that his
05:49favourite holding period was forever. And to build true wealth, you need a long-term mindset with
05:55investing. I think if you go in with this mindset, then buying stocks and shares and index funds can
06:01be a great way of growing your wealth. I hope this video has been helpful. Feel free to add any
06:07questions in the comments and I'll see you on the next video. Take care and bye for now.
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