This course isn't meant to be an
introduction to investing in general,
it's more about an introduction to value
growth investing and the method I use
to make 20-30% return on my
money year-on-year. Just to make sure
that we're all on the same page though
I'll run through some basic investing
concepts before moving on to value growth
investing specifically.
So investing is all about finding an asset
that you can buy that you expect to grow over time.
Remember it's about making your money
work for you instead of you working for money.
Examples would include buying property
and watching its value rise as you take
in rent. Or fine art that grows in value
over time. You can also invest in gold or oil,
or my preferred method the stock market.
In the stock market basically what you're
doing is buying a small share of a
business that you think is doing well and is
likely to do well in the future.
If that's the case then you could sell your
shares and make a nice profit
that hopefully is greater than inflation.
Investing in the stock market has been
shown to give the highest return over many
years and in my opinion is easier than
investing in property or fine art, with
much less risk. An added benefit is that
many stocks pay dividends that you can
reinvest in the company to increase your
returns even more. But there are
alternatives to investing, including
spending your money as you earn it
so they have lots of possessions that
usually lose value over time.
Or you could save some money each month in a
bank account but you don't get much
interest on your money and inflation
eats away at your savings year after year.
Another possibility would be to put
your money in bonds.
This is like lending your money to a business
or the government for which you get a
regular interest payment. But there's rarely
any capital growth in the bond and there's the
real possibility that you wouldn't get
your money back if the company got into
trouble, especially if you buy bonds in lower
grade companies.
The next question to ask
yourself is should I be investing at all?
It makes sense that you should only be investing
your money if you actually have money to
invest and aren't in debt.
I mean a mortgage and car loan are probably
ok but I'd pay any credit card debt off
before I invested my money elsewhere.
In fact I'd probably pay the car loan off too,
unless the interest rate on it was very low.
You can also invest money in your
retirement fund in some cases and this
would make sure that you have a nice pot
of money to take you through retirement.
Another question to ask yourself is should I
invest the money myself or give it to
a financial advisor or fund manager?
This is a question that I'm afraid only you can answer
after you've got some financial education
or you've found a method of investing
that you feel you can trust.
But I would ask you this question:
who would treat your money most carefully
you or a financial advisor?
There's often a conflict of interest here,
advisors are wanting to maximise
commissions and fees and they often focus on
frequent trading, rather than buying and
holding for the longer term.
Individual investors want to minimise fees and
increase long-term returns on their money
so less frequent rating is probably best.
If you're interested in learning more
about investing then I don't think you
need an advisor. You can learn all you
need to know yourself or follow my
method of value growth investing.
You can even open a virtual portfolio to start with
so you aren't risking any of your own money
as you learn the steps involved.
So if you've decided that investing is for you
and you have a regular amount to invest or
a lump sum, what are the barriers you face
when you get started?
Well first of all there's knowledge
or rather lack of it. It can take years for
you to gather the information you need
to make sound investment decisions
unless you follow a proven method that
you can trust to give you good returns
with minimum risk.
Next comes time and have you got enough of it
to spend learning all you need to know
and then doing all the research to find
good companies?
To do all this you also
need to have a strong interest and
enthusiasm for investing, unless again
you're following a trusted method.
Finally you may face uncertainty
especially listen to others who don't
show your desire to earn good returns on
your money. Or who are worried about the
unknowns of the stock market.
So what are the benefits of investing
on the stock market?
First of all the returns on your money have been
shown to beat savings property and other
investments over the long term.
The risk of loss can also be minimised by doing good
research on companies and by setting the
price that you will sell at if the
stock doesn't perform as expected.
Your money is also liquid in the stock market and
this means that you can always get hold
of it and you don't need to wait to sell
a property for example.
Investing in the stock market can also be an interesting
pastime, at least for me. I enjoy
researching good companies and reading their
financial reports. This may not be for
you though, so I've put together a
step-by-step approach that enables you
to reach an investment decision, without
the painful and stressful analysis of
all the numbers.
Finally you have the security
of knowing that your money is
invested in solid companies that aren't
likely to go out of business anytime soon.
Let's now look at some of the pitfalls
that could arise once you've actually invested
your money in the stock market.
First of all it's important to have a
plan before you actually make your first
investment, so that you're not constantly
second-guessing yourself or listening
to the news or other people
when making your investment decisions.
It may be helpful to invest with pretend
money first until you've the confidence to
invest real money and not get unsettled by
the ups and downs of the stock market.
Having a clear understanding of what
you're investing goals are is important
and it'll help you to stick to your strategy.
Also don't invest with borrowed money
or money that you may need soon.
And try not to focus on the short term
instead take a longer-term view and over time the
returns on your investment will come.
Unfortunately growing your wealth does
take time and there's no shortcut
and frequent trading leads to higher transaction
costs, that'll impact on your returns.
So make less frequent, larger investments rather
than frequent small ones.
Finally avoiding losses is really important
so make sure that you've done your research and
you're clear about when you need to sell your investments.
Once you've made the decision to invest
your money it's important to look at the
different types of investing and it's
also important to have a plan or strategy
that covers all seven pillars of investing.
Value growth investing is one
method and this has given me high
returns with relatively low risk
over many years and allowed
me to retire to Australia at the age of 50.
So let's take a closer look at
value growth investing and see what it involves.
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