GOING ALL IN. INVESTING $1,000,000 INTO THE MARKETS.
That finishes all my investing for this year, so i can now just take it. Easy is what i would say if i had actually made money. I actually lost a hundred thousand dollars today, but you know someone like me as an ex google tech lead and an investing professional. I have not only made but lost hundreds of thousands, if not millions of dollars in the stock markets and today, im here to share with you my top seven lessons from my years of experience in investing in the markets and so youre going to learn. All of my lessons from investing lets get into the video now i have to say one of the best ways to invest is to keep it fun and engaging for yourself which you can do by investing in art, so thats right. A lot of people dont know this, but you can actually invest in beautiful artworks from legendary artists like bainski picasso, monet and more by using masterworks.io. So masterworks is the platform for investing in contemporary blue chip, art for just a fraction of what billionaire investors pay to purchase and thanks to masterworks for sponsoring this video see, investments in art were previously limited to the super wealthy, but masterworks is changing that, based on Research in our trends and appreciation and value projections, masterworks purchases art and makes it investable to masterworks members. Only the art is then held over time until masterworks finds the time to sell once sold.
The returns are distributed back to the investors, and so this is your chance to invest in the world of contemporary art, which is a world not only of fun beauty and sophistication, but also one of the most stable markets offering returns of 14. In the past 25 years, masterworks io is giving everyday people like you and me the chance to join the ranks of the billionaire art collectors and get in on the once untouchable asset class. That is the art investment world. Signing up is super easy and takes less than 60 seconds. If you want to skip the waitlist, there will be a link for you in the description below check them out. Masterworks.Io, alright, so tip number one, the s p. 500. We all know that one right its just pretty strong its really hard to beat the general stock market. In fact, most investment pros cannot beat the stock market. According to a 2020 report, over a 15 year period, nearly 90 percent of actively managed investment funds failed to beat the s p 500, and these portfolio managers are often ivy league educated investors, who spent their entire work day, attempting to outperform the stock market and if They cannot consistently beat the market its unlikely that a typical at home investor would achieve better results. So, despite the thousands of stock and crypto youtubers claiming they can beat the markets, if all you did was just buy and hold the s p 500, you would probably outperform almost all of them, and it is just an incredibly strong position to just buy and hold The smp 500 right thats, really all you need to do.
The flaw is when people start deviating, they get a little bit greedy and they start getting into penny stocks and speculative stock plays and futures and options and foreign exchanges and a bunch of random stuff, and then they start losing money that way. But if all you did was just that basic s, p 500 strategy, it would just be very, very strong, now theres a number of ways to invest in the s p. 500. One is the spy etf. This has an expense ratio of 0.09. I used to do this one until people pointed out. I should be doing the voo index, which has a lower expense ratio. So i would suggest this one if youre going long term into the s, p, 500, and so the problem for me – and this happens to everybody – is i got into a bunch of other random investments. I got into commodities, gold, random tech, stocks, futures options, farm stocks, random stock recommendations from youtubers, and i ended up just losing massive amounts of money. You know every day i was reading the news i was panicking, i was buying, i was selling and you know i should have just just chilled and just held on to that position and i would have made more money sitting on my hands than thinking that i Could beat the s p 500, and it seems everybodys got a story like this now this takes us to tip number two, which is keep it simple.
You know investing is actually really simple. It is the financial advisors who want to over complicate things such that you hire them for their services, but you know systems like dollar cost, averaging actually dont work. Diversification is actually not that great. Despite what you hear, dollar cost averaging, which is the practice of putting a little bit of money in each month to invest, does not actually work based on multiple studies. People compared the results of dollar cost averaging stock purchase over 12 months to a lump sum investment. Each year, the result, two thirds of the time the lump sum investment returned more than dollar cost averaging, and the reason is because generally time in the market beats trying to time the market. So the problem is, when you are dollar cost averaging youre, essentially placing a bet that you think the price will be lower later on so thats, why youre not buying now the thing is most investing returns happen on sporadic days and you cannot afford to miss those Days in the 20 years from 1998 to 2019, if you had just missed the 30 best trading days, your returns would drop about half to 5.1 percent compared to 10.5 annualized per year. So arguably, instead of coming up with all these random complex systems, where youre going to spread out your money over many months and youre going to pick a bunch of random stocks, if you had just take all of your money and the lump sum and just plowed It straight into the s: p, 500 youd probably be done, and it would be a very strong play that way and famed investor warren buffett also said.
Diversification as a practice generally makes very little sense for anybody. That knows what theyre doing it is a protection against ignorance. According to him, maybe three to six stocks is enough now take note. This depends on your financial goals as well. Diversification may preserve wealth, concentration builds wealth, but i suspect that the way these top investors play is that they just do massive amounts of research on the stock markets and the timing, and when they identify something that is just really good. They go all in on that. Instead of just randomly diversifying their eggs into a bunch of baskets, and they dont really pay attention to anything, rather, they identify these key opportunities at real opportune moments, like maybe some event in the markets. You know, for example, when you take a look at this guy, the chewy founder. He owns 550 million dollars worth of apple stock. He owns just two stock apple and wells, fargo and thats pretty much all he owns. In fact, this article was written in june of 2020. What was his performance? We can see hes actually up about 100 on his apple holdings, whereas the s p 500 would be up about 33 or so so that was a good play for him. You know elon musk, i think also probably not very diversified. Most of his wealth is in tesla and spacex, and really the problem for me is. I had just explored all these random stock investment vehicles that were very complicated and had all these hidden fees baked into it.
For example, futures you know, futures are highly leveraged, you can see here are the gold futures, for example, they go up in price actually over time, and so at first, you may not realize why does it cost more as the expiration dates for the futures get further Out and thats really due to the time value of money, so this is the price of the premium on holding a leveraged futures position and leverage cost money. You know these are just baked into prices, though, so you dont necessarily know that the same goes for options, and you know theres these strange etfs as well such as the pro shares ultra s – p. 500 sso. You know this one i used to engage in as well. It turns out the expense ratio, for this is pretty high about 0.9 percent. So, in my experience you end up with all these bizarre investment vehicles and you get ethan alive by the fees and expense ratios. You know take a look at this one arc: innovation, etf, for example. The expense ratio is massive 0.75. Simply for getting into this. You know what their holdings are: its just tesla roku square zoom, shopify spotify. So i would say you can easily replicate this portfolio. Maybe get some tesla or s p, 500 and again you can see. Arc has been underperforming down nearly 50 for the year compared to like teslas up 32 s, p 500, almost flat for the year, all right tip number three pay attention to compounding so compounding happens when your investments get reinvested and there are certain scenarios where this does Not happen, for example, when youre buying and selling a lot and youre realizing a lot of gains and youre paying taxes each year you dont get to compound on that, because youre paying taxes on about half of the gains, and so this is another reason why buy And hold is such a strong strategy because you get the auto compounding in there for you, you know theres a few other strategies.
Good investors will do like tax loss, harvesting or using tax efficient accounts like 401ks or iras in order to do most of their trading. So this defers taxes on gains or dividends such that you can reinvest now. Speaking of investing systems, theres also certain stock brokerage apps out there, usually the ones with zero commission fee trades. Those will usually sell your order. Routing flow such that you get worse, prices and higher spreads. I would suggest using interactive brokers, for example, and you know you can also take out margin, loans against them and, as we mentioned before, that can help you avoid realizing gains now. Tip number five is to understand that investing is all about opportunity, cost and really thats about the time value of your money. So let me give you an example: lets pretend theres a million dollar house and theres also a two million dollar house. What is the difference between the million dollar and two million dollar house? Its? Not a million dollars in value its? Not like one house costs twice as much, because by the time you sell these houses right, you sell the million dollar house for a million bucks. You sell the two million dollar house for two million, or so so you dont lose any money either way right. So the price difference is not that youre paying an extra million dollars because you sell it for the same price. The cost is really the time value of tying up.
Another million dollars in this house, so heres how you would calculate it lets imagine you can make a five percent return on money. So, given a million dollars, you can make five percent on that thats about 50k per year, and so given the million dollar house is basically equivalent to 50k per year in apartment rent, which is about 4k per month in apartment rent. You can either have a million dollar house or a 4k per month apartment thats about the same value, given that you can make about five percent return on money now, given the two million dollar house is like 8k per month in apartment rent, so you have to Ask yourself, then: would you rather have a 2 million house or an 8k per month apartment because thats, essentially, what youre buying an ak per month apartment, although this doesnt assume any price, appreciation and investment properties, and so anytime you invest in anything whether thats stocks real Estate pokemon cards, you have to ask yourself: what is the opportunity cost, the time value of money that you have tied up in this asset versus another asset right where you can be generating five to ten percent returns on, and so at the end of the day, This opportunity cost of tying up your money in an asset i think, is kind of what were all arguing over in investments all right and then my last tip is investing should be boring when done right.
I think somehow we lost this lesson along the way with gamestop amc, stock wall street bets, cryptocurrencies board apes and all of the youtubers out there, making investing this crazy, carnival circus that were doing and everybodys just watching it. The whole time mass hysteria, panic and selling and with social media, especially theres jackpot winners every single day screaming about how they just won a brand new car and everybodys watching them. Thinking, hey, maybe next time, im going to be the one whos going to win this brand new car and other people are losing massive amounts of money and posting their lost porn and were just watching how much money they lost and just so exciting. Seeing all of the bloodshed, but the problem with all of this is that your investing skills are simply not valuable skills, youre, never going to be hired as an investor at jp morgan. So why are you building up your investing skills is going to date. You, based on your trading skills, people are probably going to dump you for your day trading skills once they see your returns, and so the problem for me was. I spent hundreds, if not thousands, of hours, developing this totally useless skill of investing that nobody would ever hire me for, whereas in fact i could have learned something else, you know i could have learned guitar right. I could be a rock star by now, or maybe i could be learning pick up game and i would be a pickup artist by now right that would have been far more useful.
I mean literally anything else would have been more useful, but ill do for me. Let me know your top tips on investing in the comments below ill see you there. If you like the video, give a like and subscribe. I appreciate that and ill see you in the next one.