Did you know that if you're not investing, you're actually losing money every single year? Sounds dramatic, right? But it's true.
你知道嗎，如果你不投資，實際上每年都在虧錢？聽起來很誇張，對吧？但的確如此。
00:08
And it's all thanks to something called inflation. Imagine leaving $1,000 in a jar for 10 years. Thanks to inflation, that same $1,000 might only buy you what $800 buys today. Basically, your money gets weaker over time if it's just sitting there doing nothing.
Now, inflation isn't the same everywhere. Different countries have different inflation rates depending on their economy policies and all that fun stuff. But since most of you watching are from the US, here's a quick reality check. Over the past few decades, the average annual inflation rate in the US has been around 2 to 3%. That might not sound like much, but over time it really adds up.
But hey, congrats. You clicked on this video, which means you're already doing better than most people. So, we can say if you spend more than you earn, you go into debt. If you save money in the bank, you're losing to inflation slowly. But if you invest, your money can grow faster than inflation, and that's how you build wealth. Welcome to Mavic Finance, where we explain investing concepts in a simple way.
By the way, this video does not contain any financial advice. Now, before we dive into how to invest, there are four super important things you need to take care of first.
Number one, kill highinterest debt. If you've got credit card debt charging 15%, 20%, or even more in interest, pause right there. It doesn't make sense to invest for a 7 to 10% return when you're losing double that every month to debt. It's like trying to fill a bucket with water while there's a giant hole in the bottom. Pay off those highinterest debts first. Especially anything over 6 to 7%. It's not just a smart financial move. It's a guaranteed return. If you pay off a debt with 20% interest, it's like earning 20% risk-free. You won't find that kind of return in the stock market.
Number two, build an emergency fund. Here's the deal. Life happens. Your car breaks down. You lose your job. A surprise bill pops up. You don't want to be forced to sell your investments at a loss because you suddenly need cash. That's where an emergency fund comes in. Try to save at least 6 to 12 months worth of expenses in a savings account somewhere safe and easy to access. On top of that, your money isn't just sitting there, it's actually working and keeping up with inflation.
Number three, have a stable source of income. Investing is not a magic trick to turn $50 into $5,000 overnight. It works best when you consistently contribute over time. To do that, you need steady income. Whether it's a full-time job or your own business, make sure you're not relying on money you can't afford to lose. And finally, number four, which is to learn the basics. Good news, you're already doing this part right now just by watching this video. Make sure to get some popcorn and let's get started.
All right, so before picking anything to invest in, you need to ask yourself two questions. How long can I leave this money invested? So again, ask yourself, am I planning to buy a house soon, pay for college, or fund another project in the next few years, or can I let this money just sit and grow for decades without touching it? That's your time horizon and it matters a lot. The second question is how much risk can I really handle? Not just what sounds good in theory, but how would I feel if the market dropped 20% next month? Because here's the truth. Even if your long-term plan makes sense on paper, it won't work if you're constantly panicking and selling every time things get a little shaky.
Now that you've figured out your time horizon and risk tolerance, let's look at what you can actually invest in. But we're going to do it in a way that makes sense. From the safest and most stable to the riskiest, but potentially most rewarding. High yield savings accounts.
Let's start with the safest option. This is not technically investing, but it's where you should park your emergency fund or any money you'll need in the short term. Your money stays safe because it should be insured by the government, and you earn a modest return to help keep up with inflation. It's super liquid, so make sure you can access it anytime. The rate you earn isn't fixed forever. It goes up and down depending on the interest rate environment. And now with interest rates a bit higher, some online savings accounts offer 4 to 5% per year, which is way better than the old school bank paying you 0.01%. This won't make you rich. It's just for safety and stability, not growth.
All right, these are one step up from a savings account in terms of risk, but still safer than the next investments. When you buy a bond, you're basically lending your money to a government or a company, and in return, they promise to pay you interest regularly and then give you back the full amount at the end of a set period. For example, let's say you buy a 5-year bond for $1,000 at a 3% interest rate. That means the borrower pays you $30 every year and after 5 years you get your full $1,000 back. People like bonds because they give you predictable income and are useful to balance out the riskier parts of your portfolio.
But there are a few things to keep in mind. The chance that a borrower does not repay a loan is a what we call the credit risk. Each bond should have a credit rating that reflects how trustworthy the issuer is in terms of repaying their debt. The higher the rating, the safer the bond and usually the lower the return. When you buy a bond, you're usually agreeing to leave that money locked in for a set period, like two, five, or even 10 years. You can sell a bond before that period ends. But here's the tricky part. You might not get back the same amount you paid. Let me explain with a simple example. Imagine you bought a concert ticket for $100, but then the band announces a new show in a better location, and those tickets go for $80. Suddenly, it's tough to sell your original ticket for the full $100 because now there's a better deal out there. It works the same way with bonds. If interest rates go up after you buy your bond, new bonds are offering better returns. So, your bond isn't as attractive anymore. And if you try to sell it early, you might have to accept a lower price than what you paid. On the flip side, if interest rates go down, your bond becomes more valuable because it's paying more than what new bonds are offering. In that case, you could sell it for a profit. So, yeah, as you'd probably agree, this isn't nearly as flexible as just keeping your money in a savings account.
Now, we're getting into one of the most powerful tools for beginner investors, index funds and ETFs. Instead of trying to pick individual stocks and guess which company will go up or down, these funds let you buy a whole group of stocks of different sectors. Let's say you invest in an S&P 500. That means you're buying tiny slices of the 500 biggest companies in the US, which includes all kinds of industries, tech like Apple and Microsoft healthcare finance energy and more. So, you're not betting on one company, you're betting on the entire economy. And it doesn't stop there. There are also index funds and ETFs for specific sectors like the famous NASDAQ, which tracks the 100 largest tech companies in the US. There are also specific ones for the healthcare and industrial sector. As they follow an automatic index, they are typically passively managed without needing a funds manager strategy. This results in very low fees like the ones you are seeing on screen. That's just a few cents for every $100 you invest.
Now, you might be wondering, what's the main difference between an index fund and an ETF? Index funds are priced once a day, usually at the market's close. So, if you buy or sell during the day, your transaction will hopefully happen at that end of day price. ETFs or exchange traded funds are like stocks. You buy and sell them throughout the trading day at real-time prices on the stock market. This gives you more flexibility if you want to buy or sell quickly. Apart from diversification, they are very easy to set and forget. If you believe in the long-term growth of an index fund or ETF, the most common strategy is called dollar cost averaging. That just means investing a fixed amount regularly, like every month, no matter what the market is doing. Some months you'll buy shares when prices are high, some months when they're low, but over time you will avoid emotional investing.
And what kind of returns can you expect? Historically, broad index funds like the S&P 500 have returned around 7 to 10% per year after adjusting for inflation. Now, quick disclaimer. Past returns don't guarantee future returns. But when you're investing in the 500 biggest US companies or even in a global index with more than 1,000 companies worldwide, you're betting on long-term growth. If you want to know more about index funds and ETFs, I really recommend watching this video, but please watch it after this one so you don't mess up my audience retention. Finally, let's talk about individual stocks.
Probably the most exciting part of investing, but also the riskiest. When you buy a stock, you're buying a tiny ownership stake in a single company. If that company does well, the stock price goes up and you might even earn dividends. Basically, a slice of the company's profits paid out to shareholders. But if the company struggles, the stock price can drop and sometimes by a lot. So, why do people invest in individual stocks? Some people study the markets, analyze companies, and believe they can beat the average returns of the broader market. And yes, just a few do. Stocks are more volatile than index funds. You need to dig into company data, things like earnings, debt, growth potential, and a lot more. And to be truly diversified, you'd need to own dozens of different stocks, which is exactly what index funds already do for you. So, should beginners invest in individual stocks? It depends. Many beginners do better by starting with index funds or ETFs. They're simpler, more stable, and some still give you solid growth. That said, some people like to put a small percentage of their portfolio into individual stocks. Not because they expect to beat the market, but because they're curious, they want to learn, and they're okay with the risk that comes with it. All right, that's a wrap on this step-by-step investing guide for beginners. If you've made it this far, seriously, well done. I hope you understand every kind of investment.
If you did, I would really appreciate it if you like the video and subscribed. I will leave this video here, which you will probably like as well. Thanks for watching and see you very soon. Bye.
10影片中提到的時間範圍（TimeHorizon）在投資決策中扮演什麼角色？What role does time horizon play in investment decisions according to the video?影片中提到的時間範圍（TimeHorizon）在投資決策中扮演什麼角色？
What role does time horizon play in investment decisions according to the video?
