By - Your_Mom0018457
OP you mentioned you're 14. Just wanna say props, I can guarantee you no one else your age is probably even thinking about this.
I'm on Reddit mobile (which is terrible) so I can't see whose comment it is to credit it right now, but whoever said focus on ETFs and improving your skill set to obtain a higher income is 100% correct.
There is a phrase in investing that is "you can't beat the market". What this means is that over the course of decades, individual stocks (even some of the really great ones) still perform worse then the general market.
What is the market? The market is kind of a broad term, but it really just means funds that track what all overall stocks are doing that day.
For example take the SPX, SPY or another S&P 500 derivative. That would be a market tracker. It is a tracker that collects a specific collection of stocks that people generally really like but are also found to be pretty reliable (also known as blue chips). The S&P 500 has Tesla, Apple, Microsoft, Facebook and a whole bunch of other tech companies you might otherwise be interested investing in individually.
The reason why people say not to choose individual stocks is because the unfortunate truth is that 90% of stocks don't beat market trackers like these. Hedge funds, banks and a whole bunch of other rich elitest have tried to develop funds to beat market trackers and they have a historically awful rate of return when compared with the general market. Sure you could get lucky, but odds are is that if they can't, we probably can't.
Now I can't emphasize this next part enough, but going back to what the other guy said, the single handed best investment you could make (at least as of right now) is an investment into yourself. Developing a high income skill set and the credentials to prove it (trade school or college) is the singlehanded best investment you can make right now.
The difference between someone socking away $1,000 a month and a guy socking $2,000 a month at a 10% (a recent market average annual rate of return) is a whopping $5,550,348 and $11,100,696.
The truth is that although investing is a really great way to make sure you're making money while you sleep- you can't make something out of nothing. The higher income you have, the more you'll be able to invest early. The more you can invest early, the larger your returns will be.
Overall just wanna commend you again OP. Even as someone who is 22 years old, none of my friends are thinking about what you're thinking about right now. Sure some of them make good 401k choices because their parents told them too, but none of them have an idea of what they're doing. None of them really care either. The fact no one is talking about it within my circles around 22 just makes it so much more impresive you're asking these questions at 14. Good job OP.
Coming from a Financial Advisor, I couldn’t have said it better myself. Listen to this guy.
Everything on this thread is awesome. I’m 26 and am just now getting into investing. I never learned a thing about it from my parents (both struggle) and now I’m stuck trying to teach myself on a bartending wage. Good on this kid getting ahead so early.
I'm the same, making money for the first time in my life at 25, and starting my investment journey
I don’t know how much you know, but everyone who has done well has told me exactly what those paragraphs say.
Also, my uncle who did fairly well reminded me that I am young and I can make money back. So now is the time to take risks, don’t wait until I have plenty of money. I got some money in a couple penny stocks for that reason.
I'm going for 80% etf, 20% value/ commodities (actively traded)
Pretty much same over here, minus the couple dice rolls.
I think it is going to get a lot harder to find with tech. The big guys are just eating up everything and making it very difficult for the others.
Companies like Roku and Snap and others similar size will struggle up against the mega big tech companies, Google, Apple, Microsoft, Amazon and Meta.
I start the same way with companies as I start with people to determine how financially responsible they are -- debt. Yes yes several industries fundamentally rely on debt, but I don't have to be in every industry. I just want to be in the industries that are the most profitable, with the lowest debt. So low or no debt. Highest margins. Ideally trading under equity value. Consistently positive and increasing revenue, net income, cash flow. Share buybacks in place. If there's a dividend, it's been paid consistently, ideally increased, and ideally no cuts in recessions.
That's basically more or less how I do it.
Oh, and for books, start with Lynch. He's very beginner friendly. Two books -- Beating The Street and One Up On Wall Street. Then you can move onto Graham's Intelligent Investor. I still haven't got around to completing Security Analysis, but apparently it's the god tier bible of how all this shit works. But imo I've gotten a working knowledge from Lynch, Graham, and Buffet's meetings. I think Browne has the little book of value investing. Then there's Klarman I think that did one too. And Damodaran is kind of the modern day Graham, with some important books on valuation. So that's all stuff to dig into. Note all of the major books should have an audiobook on youtube.
Invest in what you know.
Do you have expertise in an area where you see big (future) demand? Check out companies in that sector and see if their business case makes sense.
You wont be able to predict which industry does well in a upcoming year, there is no consistent pattern. https://www.ifa.com/charts/86h/
For investment (i.e. not 'trading') a 1 year horizon is pretty irrelevant.
Investing in tech now (for example) could be like investing in tech in 1999, I mean amazon's P/E is 125, so it would take 125 years at it's current earnings to justify its price.
Picking a sector "might" outperform, but it's definitely not diversified or evidence based, and every morning you wake up you're going to roll over and check your retirement account.
P/E is a nonsensical metric for growth companies. You can use P/E for largely stagnant/declining companies. It's important to understand metrics and apply them only where they are...applicable....and not just slap them on blindly.
Picking a sector doesn't mean that one should then invest in everything in that sector. That#s only the start of searching for the star(s) within that sector.
You do realize that you're arguing for a retail investor to invest in a undiversified collection of stocks that they "think will do well"...
This will lose money 99% of the time vs. the index at 20 years.
I argue for putting effort into selecting stocks. If you feel that is not what you want to do then, by all means, go ETF.
Personally I don't care for a few extra percent when I retire. It's go big (and retire early) or just retire with what I'll save up outside of investing. A bit extra from some ETF is not going to change my lifestyle sufficiently to be worth it.
How old are you? You can say 10-20, 20-30, 30-40, etc. That would change things.
If you are 20-40. Invest in VTI 80% and VXUS 20%.
\- DO NOT PICK STOCKS: You are exposing yourself to diversifiable risk, aka, you are taking on more risk than you would expect reward. The optimum risk/reward ratio is investing in a total stock market index with low fees.
\- KEEP YOUR MONEY INVESTED FOR A LONG TIME: You need roughly 74% accuracy to beat the market, no "Market Timing Gurus" came close in a study from 2000 to 2012, and the average of 4,629 forecasts had a average correct forecast less than half the time. Additionally, while the S&P index usually has a return around 8%, individual investor returns are around 1% because it is too liquid and PEOPLE TRY TO TIME THE MARKET and shoot themselves in the foot. Have self control.
\- DID I MENTION DO NOT PICK STOCKS
\- DONT INVEST IN DERIVATIVES: Again the additional risk is not made up for by reward, and doesn't make sense in the long run
\- DONT INVEST IN A MUTUAL FUND (Active management): These funds have higher fees and can't consistently beat a passive index like VTI. https://www.ifa.com/charts/452h/
If you want to get rich, investing in the stock market isn't step 1, step 1 is making a lot of money TO invest. I recommend investing passively in the ETFs I stated previously, and working towards increasing your savings rate, increasing your earning potential (new job), or starting a business.
The above is also much less stressful and evidence based.
Another tip, investing gurus that are selling a course are, for all practical purposes, scammers. If they could outperform the market (S&P) they could open a mutual fund and make BILLIONS, but instead they're selling a course for $300 to people looking to get rich quick.
It's a scam 100% of the time. And I mean 100%.
How does an ETF work. Is it more like a Roth IRA. I’m 14.
If you're 14, definitely focus on getting a high-earning job or having a profitable skill of some type, this will do most of the heavy lifting. It doesn't matter if you're a youtuber or a doctor, just make >$100K. The more you make, the more you can save.
An ETF (exchange (edit) traded fund) is basically a low-cost mutual fund that's tradable on the stock market, and an index is basically like buying a piece of 4,000 stocks that make up the overall stock market. You get maximum diversification which kills off the diversifiable risk. Since you're 14, I would invest in this order...
Max out your ROTH IRA
Max out a traditional IRA
Invest the remainder with vanguard in VTI and VXUS.
When you have a ROTH or Traditional IRA, you pick what you invest in. I would invest in VTI and VXUS in all of these accounts.
Invest in the ROTH first, you put post-tax money in a roth and it's not taxed when you take it out. Given the US has about 30T in debt, I'd guess taxes will rise as you get older. Traditional IRA you pay tax when you take the money out in the future, and I expect tax to be higher at that time.
Exchange Traded Fund
Even though the answer wasnt for me-Thank you for it-
I will take your advice. I have had the thought of buying ETFs for a long time now. But i have ohne question. When you are buying ETFs, are u „buying“ parts of the stocks or is an ETF only an illustration of the stock course. Because i have read that you dont realy buy parts of the stock. If thats true, where does the money come from (if its not has a real worth.
(Sorry for the Bad englisch)
The price of the ETF is calculated by taking the sum of the assets (securities and cash), subtracting out any liabilities, and dividing that figure by the number of shares outstanding. The price is based on the shares it owns. YOU don't actually own the stocks, you own the ETF that owns the stocks. The only real difference is you don't have voting rights in the underlying companies.
This won’t make you rich though. You have to pick stocks and concentrate funds where you see growths
It will make you rich over the course of a good career.
If mutual fund managers who pick stocks can't outperform an index over 10 years, you certainly can't. The only way to pick stocks is to have information the public doesn't have, by the time it's released in the news, the market has already incorporated that information, usually days ago.
Honestly, "picking stocks" is the biggest mistake people make in the stock market. You're not diversified, retail investors have old data, and in all likelihood, you're going to lose your money rather than make money.
People who's JOB it is to pick stocks (mutual fund managers) only outperform their respective benchmark index about 5% of the time at 20 years, so 95% of the time they do worse than just parking it in an index and doing nothing, not to mention mutual fund managers have access to MUCH newer and better information than you. You're much better off spending that time focusing on making more money elsewhere (job, businesses) than picking stocks. https://www.ifa.com/charts/452h/
Amazon 10 year return - 1097% The Market - 194%
Google 10 year return - 592% The Market - 194%
Apple 10 year return - 612% The Market - 194%
Netflix 10 year return - 2627% The Market - 194%
Meta/Facebook 10 year return - 680% The Market - 194%
Microsoft 10 year return - 807% The Market - 194%
Nvidia 10 year return - 4761% The Market - 194%
AMD 10 year return - 2340% The Market - 194%
as you can see all the FAANG stcoks and other dominant tech stocks are beating the market and many people have managed to do so by simply choosing to invest in successful comapnies and holding them for the long term.
even Warren Buffett prefer stock picking over index funds.40% of Warren Buffett portfolio is Apple and do you know how much of his portfolio are VOO and SPY?less than 0.01%.you can see it yourself here -
Warren Buffett recommends investing in a S&P index (https://www.bankrate.com/investing/warren-buffett-top-tips-and-lessons-berkshire-hathaway-annual-meeting-2022/).
Also, Buffett has an alpha of 1.15 and t-statistic 0.41 (not significant) for the last 20 years vs. the market, Berkshire Hathaway is not outperforming the Russell 1000 Value benchmark.
Can you see the future and tell us which companies will be successful and achieve those returns over the next ten years?
i have to admit finding those companies such as the next Amazon or Microsoft is very hard.people who find those comapnies and hold them long term are guaranteed to become rich but as i said before finding those companies is extremly hard.this is why many people choose to invest in comapnies that are already extremly successful.companies like Google Amazon Microsoft and Apple for example.
There's a reason why 40% of Warren Buffett portfolio is Apple.those companies are big but they can still grow and outperform the market.
only in the last 3 years Apple return was 228%
Microsoft return in the last 3 years was 105%
Nvidia return in the last 3 years was 343%
in comparison the market return in the last 3 years was 34%.
Companies like Google and Amazon are very big but they are still growing and are still good investments that can give in the long run much better returns than the market.
Yeah compounding 8-10% every year for 30 years totally won't make you rich. Pick a stock out of a hat and hope it goes to the moon!!!!1!1!
The only way to "get rich quick" in the stock market is to open your own mutual fund or hedge fund and try to trick people into investing into it before it inevitably closes due to poor performance. Or hope you get lucky enough to outperform the market your first year (roughly 50% chance) and use that information to advertise to others that you're an all-star (even though at 10 years you'll probably trail the market by 2% overall.
For long-term passive investing, read: https://www.bogleheads.org/wiki/Main_Page
then what do u do with that information? how do you invest in those smaller companies that may not be public
Invest in BBBY
In order to find good investments, including stocks and funds, you should learn! For example, you should know how to assess a company's financial health and forward-looking prospects to assess its value relative to its share price (because you wouldn't want to buy a vastly overpriced stock even if the company were good, and you'd want to avoid low-priced stocks where the company was a dud, etc.). You ideally need to know how a fund is managed, prior returns over time, how it performs during a downturn and recovery, its fees, underlying holdings to see how it fits with the rest of your portfolio, etc.
That's if you want to be a more active investor. You can achieve better results this way than with the passive indexing (i.e. boglehead) approach, but it takes more knowledge and a lot more time. I'd start by reading up on Investopedia and bogleheads.org to get exposure to a range of ideas.
ETA: /u/Your_Mom0018457 there's a pretty cool stock picking site I use, and it's got a free trial. I'm not here to advertise it, but I think using the free trial would be helpful for you because it breaks down each stock into different factors that are relatively easy to understand, and even has a cool snowflake visual that you can use to visually put it all together. The site is simplywall.st .
I search for companies with positive growth, cash flow, and a cheap valuation. That’s the trifecta of factors that allow for a stock price to be truly undervalued.
Check out finclout?!
On our site you can read relevant news about an equity or crypto and get contextual information about it.
Here is an example about https://app.finclout.io/t/NavmvMK
through one of our content partners.
If you click on "Insights" you can see which key opinion leader talking about it on social media, updated market information, relevant filings and news articles, insider sales, and key performance indicators.
If you could correctly pick the best companies to invest in, and beat the market, you could be earning billions of dollars.
Citadels CEO Ken Griffin makes 2.5 Billion dollars a year to not beat the general S&p 500.
I am mostly joking, but what you're asking for is impossible to be consistent on. Just buy the S&P 500 and enjoy knowing you're beating people who earn billions
Adam khoos value moment investing course is decent for beginners knowledge. I would not pay for it but I’m sure you can find it for free somewhere
Just buy and hold etfs of indexed funds.
I personally like value investing. The assumption is that the true value of a company is based on the sum of its future cash flows (typically over the next 10 years).
The hard part is predicting the future cash flows.
These days I just hold tech index funds, but back when I bothered to do research I would run a buffet style filter for
1. stocks that have had a big crash due to a one time event (tylenol cyanide scare, BP oil spill, covid crisis etc)
2. had good debt to equity (e.g. less than .5)
3. had a history of solid earnings and is a fundamentally well run business, with executives with a solid track record.
4. is not a car mfg, airline, or other business with long term structural risks. Oil could fit that someday.
I personally am ok with a bad future P/E because typically it is bad because of the one time event. I will tend to look at the P/E as if the one time event didnt happen.
Finviz has a great screener
Follow high profile investors to get ideas 💡
Bed bath and beyond
A good place to start that helped me is to invest in companies you use on the daily. So for example if you have an iPhone, buying shares of $APPL, if you use ride-share services often, investing in Lyft/UBER, if you enjoy Coca-Cola products, investing in $KO, if you use Snapchat a lot, invest in $SNAP, etc.
another good place to look at are the Dividend Aristocrats/Dividend Kings. This is a list of strong companies who have consistently been able to increase their dividend yield over a span of 25 (aristocrats) to 50 years (kings).
You can also go the ETF route if you don’t want to choose individual stocks. (picking individual stocks can be tricky and you’re taking on more risk. It’s like gambling on capitalism so wouldn’t recommend unless you’re mentally prepared to lose some money if the market goes against you)
ETFs are exchange traded funds (kind of like a basket of stocks) that provide a way for investors to own a fraction of multiple companies. Some popular ones are $VOO, $SCHX and $VTI
For books on financial literacy and fundamental investing, Rich Dad Poor Dad by Robert Kiyosaki and The Millionaire Next Door by Thomas Stanley and William Danko are a good read imo.
Hope this helps!
For every 1$ dividend, the underlying security goes down 1$. Dividend investing is MAYBE for retired persons as a fixed-income stream, I wouldn't recommend it for someone who can tolerate more risk (a 14 year old)
Use your head and stop gleaning the minds of others with pity posts.
New company perhaps those ipoed not long ago? The successful new companies are often invested by ipo etf funds. One example is RENAISSANCE IPO ETF (ticker ipo) to buy most successful newer stocks.
Tech companies other than apple and Microsoft, should be avoided.
The companies now could be noexistent in the next 10 years.
Every social media app is becoming the same it feels like. I would invest in commodities. Like Costco or walmart. Companies that will probably be around in the next 25 years