HOW TO INVEST $1000 📈 Investing Your First 1000 Dollars

(futuristic sounds) – So this seems to be a
popular topic on YouTube, I’ve seen a lot of other
people talking about this and I kind of thought
it would be interesting to give you guys my two cents on this. So this is basically how
to invest 1000 dollars. I have, like, the four places
that if I were starting off and maybe I was 18 years old. Let’s say that I had saved
up a thousand dollars from working a summer jobs, and I was looking to get
into some kind of investment. You know, I have some extra money around. Here’s what I would do with your money. And, some of these
answers might be kind of, I don’t know. All I know, all I can say
is this is not what I would have wanted to hear
when I was 18 years old. And the primary reason is
because a lot of people have this idea in their
head that they can just go invest in a stock and
they can make, you know, ten times their money, or a hundred times their money, in a short term period. And unfortunately there’s
a lot of very deceitful people out there in the realm
of stock market trading. And a lot of people are
pushing people towards, like, penny stocks and stuff like that. And those are just not
realistic returns to expect from the stock market. And I wouldn’t recommend
ever going in to an investment in, like, a penny
stock or anything like that. Because those are for very
experienced investors who are comfortable with a
substantial amount of risk. So, just I wanted to throw
that out there at first. If you guys are like,
thinking about buying a stock, do not buy a penny stock. And I’m gonna be doing a
video soon, really going in depth about penny
stocks and the reasons why you should avoid them like the plague. Personally, I’ve never
invested in a penny stock and I probably never will. I do talk about them on
this channel sometimes just because it’s a
popular financial topic. And I kind of studied the
trends on YouTube and I see what people are searching for. And I make videos a lot of the times, based off of search trends. So I do talk about them
just to educate people but personally I don’t invest in them, and I really don’t advise
most people to either. So before you want to start investing, there’s a couple things
I recommend that you do. The first one is pay off
any high interest debt that you have. So let’s say you have
like a credit card and you’re paying, I know
personally on my Discover Card, my interest rate is 19 percent a year. I never carry a balance on it but lets say for example, I had credit card debt. And every year I was paying
19 percent interest on that. You are not going to invest your money in anything that’s
going to give you better than a 19 percent return. So pay off any high
interest debt that you have before you even consider
investing in form. Even as little as 1000 dollars. Because, odds are, that
you’re never going to find an investment that’s
going to make more than what you’re paying in interest. Now, the one thing that I will say though, like lets say you have a car loan. So for example, I have a
loan on one of my cars. And I pay, like two point
five percent interest, it might even be less than that. It’s pretty low. So I don’t pay, I didn’t
pay my car loan off before I started investing in
stocks and mutual funds and things like that, because
I’m confident that I can beat a two and a half percent
rate of return per year. So I know that paying off
that car is not going to be better for me than
making my, you know, making a little bit more money in
interest off of an investment. So that’s the one thing
I would say if you have, like, a car loan or maybe very
low interest student loans. Maybe that’s something that
you can say, okay, I can invest while paying those down each month. But if you have high
interest credit card debt, definitely do not invest
until you have that paid down. Second thing you want to
do is you want to make sure that you built up a six
month emergency fund. This is a mistake that I made when I first started investing is I had
put all the money I had into stocks. And I ended up deciding to buy a car. And I talked about this
story before, didn’t consider the fact that
I had to pay taxes and DMV fees on that vehicle. And I did not have the
money in my bank account to pay for that. So I had to take money out of the stocks that I was investing in at the time. And luckily, I wasn’t down
on the stocks but if you were down on your investments
and you had to sell because you needed the money, that’s
a very bad position to be in. So I would not recommend
investing money without having a six month
emergency fund built up. And the other thing to consider as well is any unforeseen expenses. The biggest one for me
that I see is car repairs. So last August I had to spend
over 2000 dollars on my car out of nowhere. And if you don’t have the
money to cover that expense, you could be stuck in a
position where, again, you’d have to liquidate your assets, whether or not they were up or whether you were at a bad market,
you were forced to sell. You never want to be in
a position where you’re forced to sell, so do not
invest money in stocks or any kind of investment
until you have a cushion built up for those unforeseen expenses, and for emergency expenses as well. The advantage to investing
early is that it’s going to allow you to take advantage
of compounding over time. So the earlier you start
and the longer that you give that money to grow,
the more it will grow based off of compounding, where the interest you’re
earning, earns interest over time. So let’s say you had a dividend stock, the dividends that you earn, if you reinvest those in the stock itself, buying more shares, you can
take advantage of compounding. And those dividends will also
earn dividends over time. So the longer, obviously,
that you let that happen, the more money you will
grow to have over time. So the earlier you
start, the better it is. The other good thing too, like, let’s say, you’re somebody like me. At that age, when I was 18, 19, that’s when I first started
reading about the stock market, getting into stocks. But I didn’t invest
until I was in my 20’s. But that was when I first
started researching about it and educating myself, because
I was always fascinated by it. The good news about that,
guys, is if you really want to get involved in the stock market,
this is the time to do it. Because you have the most
risk absorption at this time. So you’re not going to
be, like, worried about in the most cases, you know,
paying for your mortgage, paying for family, paying
for kids and stuff like that. When you’re, you know maybe
you’re in my position, where you’re still
living at home or you’re, maybe you’re renting somewhere,
you don’t have a kid yet you don’t have any crazy expenses. This is the time to do that
because you have some more absorption for risk and you
have more time in your life to basically save up money and
dig yourself out of a hole, let’s say if you ended up losing money. So this is when you have
the most risk absorption. And then the other thing, I already talked about this already. Don’t expect to pick a
stock that makes you 10,000 or 100,000 dollars in a short term. Now if you invested and
left that for 45, 50 years, yeah you could probably have
10,000 or 100,000 dollars based on what you’re investing in, because you gave it so much time to grow. But if you were trying to make
1000 dollars in six months, or if you were trying to
take 1000 dollars and go 10X in the next year or five
years, it’s very unlikely. So don’t have that kind of
expectation in your mind because that’s not a
realistic stock market return. Anyways, so these are the
four things I would do if I were to invest 1000 dollars. The first thing, number one
that this is actually the first thing I did when
I invested was invest in index funds or mutual funds. I decided to invest in mutual funds. But basically, you want to
invest in a low fee index fund or mutual fund. So make sure you’re shopping
around and considering how much the fees are,
associated with that mutual fund. Make sure it’s worth while for you. So what is an index fund? What is a mutual fund? An index fund is basically
a blend of stocks that provide broad market exposure. So you pick an index you like. Maybe you like the
semi-conductor industry. Maybe you like the oil industry. Maybe you like retail. What you do is you invest in an index which gives you broad exposure to many stocks within that industry. And the advantage to that
is you’re highly diversified so if any one company goes down, the other companies within
that blend of stocks would offset that loss. Whereas if you invested
in one individual company and the index as a whole
outperformed that stock or that stock did terrible
and everybody else did fine because that stock had bad
company news going on about it or something happened within them, you’re not going to be affected
by that if you’re in an index fund of many stocks. But if you’re invested in just one stock, you have that risk. The mutual fund is basically
a professionally managed investment program in
diversified holdings. So basically, you’re paying somebody a fee out of your investment to basically, they’re managing the money. They’re allocating the money
and moving stuff around and you’re not even doing anything. So you’re basically paying
for professional management of your money. And the idea is many people
collectively pool their money into a large fund and that
fund itself is managed by the money managers and everybody associated with that mutual fund. So here’s the interesting
fact to point out to you guys. Just if you’re considering
investing in individual stocks, and I’m sure as you guys
know, if you watch my videos, I invest in individual stocks myself. So I’m not saying that they’re bad. But this is just something to consider. From 1997 to 2012 the
All Index Portfolios, so those are portfolios
that were consisting of all index funds, outperformed
actively managed funds by, 83.4 percent of the time. So 83.4 percent of the time,
the professional stock pickers did not outperform index
funds where they were just broad exposure to the whole index, or the whole industry. So that’s just something to consider, is the professional stock pickers
can’t beat the index funds 83.4 percent of the time. So as a beginner stock market trader, your odds are against you. But here’s the thing that I
don’t like about mutual funds and index funds, is that
they’re extremely boring. There is little involvement on your part. And there’s little to learn
because it’s kind of a set it and forget it type investment. So you basically, invest
in your mutual fund and you just forget that you even have it and then 30, 40 years later
you open it up and go, oh look at that, I have a lot of money. That’s basically mutual
funds in a nutshell. There’s not a lot to learn about them. I mean, you can decide what
funds you want to invest in. Maybe you’re looking for a
global fund, or just one on, just certain markets. Whatever you’re looking to invest in. But besides that, there’s
really not lot to learn and there no real involvement
on your part, with them. So that’s the disadvantage,
is if you’re trying to learn about the stock market, you’re
not going to learn a ton by investing in mutual funds because there’s just not a lot to learn. It’s a very passive investment strategy. I do have money in mutual
funds but I also do the individual stocks too
because I like learning and I like being active
with my investments. Also having some passive
but some active investments. And just a couple of examples of places you could get mutual funds. Probably the number one is Vangaard. Number two is probably Franklin Templeton. That’s where I have my mutual funds. And then these two are kind of new: Betterment and Wealthfront. They’re considered robo-advisories Or robo-advisor services,
where they basically have, basically computer programs
automatically adjusting trades and doing the management
based on computers. And the idea with that
is less human involvement means lower commission costs so it’s a cheaper investment strategy. Personally I don’t have
any money with Betterment or Wealthfront. At some point I do want
to look into that though, just out of curiosity. Okay, so number two. So we, I said the first thing
I would do is invest in some mutual funds. But if you want to learn more
and you really want to learn about the stock market, you’re best bet is to invest in stocks. So stock picking shouldn’t be your primary investment strategy. It’s not mine and unless you’re
really, and this is what you want to do full time and you
want to be learning as much as you can about stocks and
studying them day in and day out, maybe you’ll have a lot more
money in stocks but most people set aside a percentage of their portfolio towards individual stocks. For me, it’s less than, less
than 25 percent of my entire portfolio, is in individual stocks. That’s probably a healthy amount in total. Maybe you’d want to have
much more than that. But like if you’re younger
and you’re looking to learn about the stock market, investing in individual stocks isn’t a bad idea. So what I would recommend that you do, is pick one company that you really like. Don’t worry so much about what
the stock is doing right now, because you’re looking at
a long term investment. You’re looking to buy a stock. You’re looking to hold
it for a long time and kind of learn about studying
company fundamentals, and looking at charts
and checking your stock, and keeping track of how
much money you’re making. And looking at dividends. You’re not looking for
a short term investment, at this time in your life. So I would recommend, pick a
company that you really like. Maybe you’re into wrestling
and you want to invest in WWE. Maybe you really like Disney. Maybe you like Coca-Cola. Maybe McDonalds. Whatever it is. Maybe you really like Apple. Pick a company that you
really like and invest in that company. Now if you’re not partial
to any certain company, what I would recommend is
look for a well-established company that pays a dividend. So find a nice dividend stock,
for a long term investment. Because that’s where you
can take advantage of the compounding so over 20, 30 years, if you’re reinvesting your dividends, you’re gonna have a lot of time
for your money to compound. So that would be what
I’d recommend as well. Now this is a huge question
I get all the time. People are like, okay, so if
I’m investing 1000 dollars, should I buy ten different stocks? And my answer to that is no. I would buy, at most,
two different stocks. 500 dollars in each stock. That is because there are commission costs associated with your investments. So for me, I personally
trade with Scottrade and it’s seven dollars per trade. So when I buy stock, I pay seven dollars. When sell stock, I pay seven dollars. So let’s say, for example,
you put 100 dollars into a stock, okay? When you bought that
stock you paid seven bucks and then when you sold it,
you paid another seven. So there’s 14 dollars or 14
percent of the total value of what you have invested
out the door right there. So in order to make your
money back on that investment, the stock has to come up 14
percent in value just for you to break even. So for that reason, I
recommend having enough skin in the game that you can
offset your commission costs. So I would say if you’re
investing 1000 dollars, at most pick two companies
and do 500 dollars in each. I don’t personally recommend that anybody invests less than 500 dollars in a stock. Unless you’re investing in some other form that, where you’re not paying commission. I don’t know, there’s a
lot of, there’s a lot of investment, and there’s
a lot of stock brokers out there and they all have
different features and stuff. I don’t know, I just use
Scottrade out of convenience but I know a lot of people
have reached out to me and talked to me about like,
low commission trading, and, I don’t know. If you guys know of a way
you can invest without paying commission, you know, more power to you. But if you’re paying
commission on your investments, consider that you need
enough skin in the game to offset your commission. Okay, number four. I’m sorry, we’re on to number three. That’s why I’m screwed up. Number three. This is my favorite way
to invest 1000 dollars and this is like, what I
recommend what you guys do. Above all else. Invest in a side hustle. So start your own business. This is the type of
investment where you could see a 10 X or a 100 X return,
is when you’re investing in an actual business yourself. So I wanted to just give
you a couple of examples of things you can start
for under 1000 dollars or for 1000 dollars total. Number one, start a YouTube channel. So I started a YouTube channel. I spent less than 1000
dollars to get started. You know, bought a decent
camera, bought some lighting, bought a white board, some markers. And over time now, I’m upgrading stuff, and kind of improving things. But at first it was very,
it was very cheap to get this started. And if you have something
that you’re super passionate about, for me it’s, you know,
stock market, as well as nutrition and fitness, and
just overall well-being. That’s kind of what I’m passionate about. It’s like personal development and just, I’ve always liked teaching people. So for me, that’s like,
what I enjoy doing. I was able to turn my
passion into a little side business that actually
does make a little bit of money, here, with the ad
revenue on the channel. So start a YouTube channel. Start a photography business. If you really like photography,
invest in a good camera. And start doing, like,
wedding photography. Something like that. You can do face painting. This was interesting too. Maybe you get all the supplies
needed to do facepainting and you start doing kids
parties on the weekends. Maybe you want to go be a clown. Buy a professional clown
outfit and do that. I mean, I know this sounds
kind of silly but you can make money doing this stuff, guys. Invest in the resources
needed to start a blog. So this is probably one of
the cheapest ways, because all you got to pay for
is basically, you know, website hosting and stuff like that. And that’s pretty inexpensive. Maybe some graphic design. But start blogging about stuff that you’re passionate about. If you’re self conscious
about getting in front of the camera. That’s an option too. Another one, be an eBay reseller. So, go around on Craigslist
or go to garage sales, and buy stuff that you can
resell on eBay for a profit. That’s a popular way to make money too. Starting a landscaping business. If you want to, if you really
want to be working outdoors, you know, start a side
business doing landscaping. That’s an option too. And then any kind of consulting. So start a consulting business,
or a tutoring business. So if you’re really good at something, people will pay you for your advice. And set up some kind of
platform where you could find customers or find clients
and do consulting for them. And then, what I would
recommend is commit all revenue from that side business to the purchase of income producing assets,
because that is what you call a cycle of wealth. So all the money that
you’re making, would then make you more money. That’s probably the best thing I would do if you guys are looking to, if you’re not afraid to
work and put the work in, invest in a side hustle. Start a little side business. Number four is investing in yourself. So this would be improving
your skill set to maybe earn more money at your job. It could also mean learning
a skill that you could teach others so that kind of ties
into starting a side hustle. Maybe you spend 1000 dollars
taking courses yourself and learning as much as you
can about a certain topic. And then you turn around
and you can do consultations with others. Or you start a YouTube channel,
educating people about that. So that’s something else you could do. Or you could just take that
money and learn as much as you can about money,
money management and personal finances, so that way, in
the future, you will have a skill set that will
help you earn more money in the future. But anyway guys, that’s pretty much all I got for this video. This would be the four places that I would recommend investing 1000 dollars. Number one, I would say,
being, investing in your own side business. This is the best thing to do. Number two, probably
investing in a mutual fund. I know I had these, just
kind of an order here. That’s not the order of like,
what I would do these in. But you know, if you want
to learn a little bit more about investing, that would
be investing in a stock. And then, you know, making
an investment in yourself, and educating yourself. That’s probably what I’d recommend doing, especially at the age of
18, somewhere around there. But, if you guys enjoy
this video, please drop me a like below. And if you’re looking to
learn more about investing in the stock market, I do have my beginners guide
to stock market trading, which I will link up in the description. And there should be an annotation
popping up on the screen here as well. So you guys can check that
out if you’re interested. But please consider
subscribing, to be notified of future uploads. And thank you guys for
watching this video. (upbeat music)

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