- 2 days ago
In this video I show you how to invest your first $10,000 safely, grow it faster, and avoid common beginner mistakes.
DISCLAIMERS & DISCLOSURES
This content is for educational and entertainment purposes only. I does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
Thank you for your support!
*T&C's apply
DISCLAIMERS & DISCLOSURES
This content is for educational and entertainment purposes only. I does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
Thank you for your support!
*T&C's apply
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LearningTranscript
00:00If you had 10,000 sitting in your bank account right now, what would you do with it?
00:04Because your first 10,000 has the power to change your life, but only if you use it wisely.
00:10Get it wrong or do nothing at all, and you can miss out on hundreds of thousands over your lifetime.
00:15If you're new here, hi, I'm Nisha. I'm a former investment banker turned financial educator.
00:20And today I'm going to talk you through firstly, why your first 10,000 investment is so, so important.
00:26Secondly, how to invest it safely and strategically.
00:29And thirdly, the biggest mistake that new investors make that could be costing them millions and how to avoid them.
00:36So let's start with the first. Why is your first 10,000 so important?
00:40Having 10,000 in the bank can feel amazing. It gives you confidence to make bigger life decisions.
00:45It makes it easier to walk away from situations, from jobs, from people that don't serve you.
00:51And it might make you feel more optimistic about the future because once you see that first 10,000 saved up and you start making progress,
00:57it's much easier to stick to the good money habits that got you to that point.
01:01But could that money be working even harder for you?
01:04I usually suggest a three-month emergency fund, three months of your living expenses saved up if you only have yourself to think about,
01:10and around six months of your living expenses saved up if you have a partner, if you have kids who depend on you financially,
01:16or if you want to be extra cautious, go for nine months. You might also want to keep cash aside for short-term goals,
01:21such as a holiday, a house deposit. When I was saving for my flat, for example,
01:26I had an emergency fund in one savings account that was easy to access,
01:30and then tens of thousands in another savings account for my deposit.
01:33It was comfortable to know that I had all the money I needed for the next two to three years,
01:37but at the same time, it was very unnerving as well.
01:40Because having worked in investment banking for so long,
01:43I realized that my savings weren't working half as hard as I was.
01:47And that is the thing. From a young age, we have it drilled into us to save, save, save.
01:53But no one tells us how much better off would be if we invested.
01:57There are so many reasons for this. I'm moving on to the next section.
02:00The top three are, firstly, savings are incredibly lazy.
02:04They sit there quietly, they look sensible and secure, but they're not really doing very much.
02:09In the UK, and many other parts of the world, the best savings rate you can expect right now
02:13sits somewhere around 4%.
02:15You can find slightly higher rates of 5% in Australia and the US,
02:19but there's usually a cap on the amount that you can save at this rate,
02:23and it might be reduced after a set period.
02:26Now compare that to the 8% you might earn from a diversified investment portfolio,
02:30and the difference starts to add up fast.
02:32If you invested 10,000 and earned an 8% return, after 10 years, you'd have more than 21,000.
02:39Keep that same money in a 4% savings account and you'd have it just under 15,000.
02:44The only thing that you've done differently is put your money to work in an investment account
02:48instead of putting it into a savings account.
02:50That is the only difference.
02:51The rest of your life has gone about exactly the same way.
02:54You've only made one single decision of a change.
02:57And this is just showing you what may happen at the earliest stages.
03:01The longer you leave it, the bigger that gap gets.
03:04That's the quiet power of compounding.
03:06And the sooner you start, the more time your money has to grow.
03:08The second reason is that investing helps protect you from inflation.
03:12Getting 4% on your savings might not actually sound too bad,
03:15especially if you live in a part of the world where interest rates have been
03:18much lower over the past decade or so.
03:21But don't forget that the price of everything goes up each year.
03:24Your groceries, your rent, your energy bills will cost more today than they did five years ago.
03:30And as the Bank of England's inflation calculator shows,
03:33goods and services that cost $10,000 in 2015 would cost just under $14,000 by August 2025.
03:41The US inflation calculator, let us go back even further,
03:45a $10,000 purchase in 1990 would cost just under $25,000 today.
03:51And this inflation, it will slowly erode the value of your savings.
03:55So even though your bank balance looks like it's growing with the help of these savings interests,
04:00it's buying power in comparison isn't quite so impressive.
04:04But by investing your money instead, your money will keep up with the rising costs of living
04:08and you'll find it much easier to build wealth on top of that over time.
04:13And the third reason is compounding turns small steps into huge astronomical progress.
04:18Imagine you invest $10,000 and you forget about it.
04:21I mean, I think very few of us would forget about that $10,000, but stick with me.
04:25Let's say this investment now grows at an average of 8% per year.
04:30The early years, this can feel pretty underwhelming.
04:32That's $10,000 with an 8% return.
04:34After one year, it becomes $10,800.
04:37It's good, but it's not life-changing.
04:39After two years though, you're at $11,664.
04:43Then after three years, just over $12,500.
04:46Each year, that original investment, you're not just earning returns on that original $10,000,
04:51you're earning returns on all of the growth from the previous years too.
04:55So those gains start getting bigger and bigger.
04:58By year five, you're nearly at $15,000.
05:00By year seven, you've crossed $17,000.
05:03And then the snowball keeps rolling.
05:05Year 10, you're at $21,600.
05:07By year 20, that original $10,000 has over 4X and grown to roughly $46,600.
05:15And remember, you never added another single penny after that initial investment.
05:19That is all thanks to something called compound interest,
05:22which is when your investment returns start earning their own returns.
05:25And this is probably the single most powerful force in personal finance.
05:31Because the longer you let your money do its thing in the stock market,
05:35the more dramatic that result becomes.
05:38It's also why people who start early, even with small amounts,
05:41often end up miles ahead of those who wait.
05:45Because with compounding, time matters more than timing.
05:50Okay, so now you know why you should invest.
05:52Let's actually go on to the main bit, which is where do you invest?
05:55First, before we even get to that step,
05:57you probably want to make the most of your workplace pension or retirement scheme,
06:01especially, specifically, if your employer matches your contributions.
06:05That is free money, and you'll never beat that kind of guaranteed return.
06:10Next, then open up a tax-free investment account if your country offers one,
06:14like the ISA in the UK, and try to max it out each year if you can.
06:19Only once you've done that step, then move on to the general investment account
06:23for anything above those limits.
06:26Just be aware of any tax implications in your country.
06:29Just to sidetrack for a moment, whenever I talk about stock market investing,
06:32people often say,
06:33Benicia, what about property?
06:34Can I start with property?
06:36Yes, property can absolutely be a great investment,
06:40but one of the reasons I talk about the stock market more
06:43is because the barrier to entry is so much lower than it is with property.
06:48Many modern investment platforms now let you invest with less money
06:52than you'd spend on a loaf of bread,
06:54whereas saving for a deposit on a house can take years.
06:59It can be hard enough to buy a house to live in for yourself,
07:02let alone buy a buy-to-let property to then rent out to tenants.
07:06On top of that, property investing also tends to come with maintenance costs,
07:11with taxes, and with the responsibilities of being a landlord.
07:16So whilst I'm definitely not discouraging anyone from going down that route,
07:19if they have the time and the money to do so,
07:21it is a great option if that is what you want to do.
07:24But I do want to say that you'll usually find stocks and funds
07:28are far easier to get into and much, much more passive.
07:32All you need to do is open a tax advantage investment account,
07:35automate your investments, and get on with your life.
07:37When it comes to what to actually invest in,
07:39if you are a beginner starting to invest,
07:41you want to keep things simple with broad, globally diversified funds.
07:46An S&P fund or an all-world index fund is a really solid starting point.
07:50It gives you safety in numbers through diversifying across hundreds,
07:56if not thousands of companies, but also through diversifying across geographic regions.
08:01And when you're looking at what fund to invest in,
08:04what S&P 500 fund or what all-world index fund you want to invest in,
08:08you want to pay close attention to the fees.
08:11How much does it cost you to invest in that fund?
08:13Because although it's going to return you money over time,
08:16the difference in fees is going to massively impact the return that you get.
08:20And this can make a huge, huge astronomical difference over the long run.
08:24By the way, I'm going to go into a lot more detail on all of this
08:27in my upcoming free workshop.
08:29It's on Sunday, the 26th of October at 5 p.m. UK time.
08:34It's completely free.
08:35Doors for the waitress close midnight the day before.
08:38It's 40 minutes long and we will walk through the exact system
08:42you need to start investing with confidence.
08:45You can sign up at nisha.me forward slash invest.
08:48It's also linked in the description.
08:51We'll go through everything from how much to invest, when to invest,
08:55the best time to invest, how to know what funds to pick and what fees to look at.
08:59Completely free, nisha.me forward slash invest.
09:02Now, before you get started with actually picking your funds,
09:05we need to talk about the biggest mistakes new investors make
09:07and how to avoid them.
09:09Because making any one of these mistakes can cost you thousands or even millions,
09:14but they're all totally avoidable once you're aware of them.
09:17Mistake number one, procrastinating.
09:20I can't tell you how many people message me to say that they've got money sitting in savings,
09:24but they're scared to invest it.
09:26They say things like, I don't really know what I'm doing yet.
09:28Or I'll start once I've learned a little bit more about investing.
09:31Or I just want someone to confirm this is okay.
09:34And I get it because I was also at one point in the same place.
09:37You don't want to make a mistake with your hard-earned money.
09:40But while you're waiting to feel ready, time is moving on and you're missing out on
09:44years of potential growth.
09:46Let's say you've got an extra 10,000 sitting in your savings at the age of 25.
09:51That's on top of your emergency fund, on top of your short-term savings.
09:54You know the right thing to do is invest it in stocks, but you're terrified of getting it wrong.
10:00So you buy the books, you download the podcast,
10:02you promise to start investing once you know what you're doing.
10:05And before you know it, you're 35 and you're only now opening an investment account for the
10:11first time.
10:12If you invested that 10,000 at 35, you'll have about 68,000 when you turn 60, assuming you
10:18didn't do anything or invest anymore.
10:19But if you invested at 25, you'd have more than 100,000 by your 60th birthday.
10:25That's again, without adding another penny to it over your working life.
10:28And my point here isn't to tell you to fling your money at any old investments, but you
10:32don't need to find the perfect investment from day one.
10:36You just need to start.
10:38Start small, stay consistent, and you can end up with a life-changing amount over time.
10:43Because in investing, time in the market matters far more than timing the market.
10:48If you look at the long-term performance of the S&P 500, for example, investors who've
10:52invested for a 20-year period almost never lost money.
10:57Even considering all the setbacks, the Great Depression, the tech bubble, the financial
11:01crisis, investors would have experienced gains had they made an investment in the S&P 500
11:06and held it uninterrupted for 20 years.
11:10The second mistake that a lot of people tend to make is they follow trends.
11:14I've seen people make this mistake again and again.
11:17It's almost a rite of passage for new investors.
11:20When you first start learning about investing, you can easily get swept up in the excitement and
11:26the thrill of it all.
11:27Who doesn't love the thought of making money while they sleep?
11:30But investing isn't supposed to be exciting.
11:34It should actually be quite boring and quite repetitive.
11:37But it's only natural for ambitious new investors to just get carried away here because suddenly
11:42everywhere you turn, people are pushing the next hot stock on you or the next crypto coin
11:48or the unmissable opportunity.
11:50And the next thing you know, you're digging out your bank card and investing in a company
11:53that you've probably never heard of before.
11:55It is not your fault.
11:56This happens to almost everyone at the start.
11:59You learn a bit about investing, you understand the basics and suddenly you feel like an investing
12:03expert.
12:04This early confidence, it is dangerous because you think you know enough to spot opportunities
12:08when in reality you've only just scratched the surface.
12:11Psychologists call this the Dunning-Kruger effect.
12:14Basically, you don't yet know enough to realize how little you know.
12:18That's why so many new investors jump into whatever's trending, convinced that they found
12:23the next big thing, only to watch the value drop as soon as they buy it.
12:27If you do want to invest in individual stocks, do it, but do it with a tiny portion of your
12:33portfolio.
12:33Think of it as your fun money for your investments.
12:36Enough to learn from, but not enough to lose sleep over.
12:40And then mistake number three, materializing your losses.
12:43This is one of the most expensive investing habits you can fall victim to.
12:46When markets fall, our instinct is often to pull the money out, but that just locks in
12:52your loss.
12:53The best investors do the opposite.
12:55They stay calm or even invest more during downturns.
12:59And the thing that gives you the confidence not to sell, but to invest instead is, and
13:04certainly back to the start of this video, is the things that we did at the start, building
13:08a solid emergency fund and setting cash aside for upcoming expenses.
13:11That way, even when the market's down, your emotional brain isn't going to take over.
13:16Your logical brain, your investor brain is making the right decisions.
13:21So main things I want you to take away.
13:23Don't build your house on weak foundations.
13:24Have your emergency fund and your short-term savings in a high interest account so you won't
13:28be tempted to panic sell at a loss.
13:30Second, it's also a good idea to pay off any expensive debts before you start investing.
13:35Otherwise, it'll just be a case of one step forward, two steps back.
13:38And third, open and prioritize workplace pension schemes and tax-efficient accounts first because
13:44your money will grow so much quicker if you have your employer's help and no tax to pay.
13:49Fourth, automate your investments and log out of your accounts if the market fluctuations
13:53are making you nervous.
13:55Because you don't need to monitor your investments like a hawk.
13:58This isn't a second job.
13:59The whole point is to make your investments do the heavy lifting so you can eventually
14:03kick back, have fun, and focus on actually enjoying your life.
14:06And fifth, it won't happen overnight, but once you've got that first 10K in investments,
14:11you'll be amazed at how easy the rest is to build.
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