How to Invest in Stocks and Shares (for Beginners)

Matt | Personal Finance

In this video, I cover all you need to know to get started with investing in Stocks and Shares. I've been investing for over 15 years and had my own ups and downs and learnt a lot along the way. If you know the basics on how to invest then you've got a good chance of using it to your benefit and growing your wealth. This video is for beginners and assumes you are just starting to invest   #investing #stockmarket #stocks #shares #s&p500 #beststocks #stockpicks #personalfinance #moneytips #howtobeamillionaire #indexfunds #goldinvestment

Transcript

00:00There are all sorts of investments that you can do from buying cryptocurrency, foreign exchange,

00:06real estate, buying wine, watches, even buying whiskey. Yet, buying whiskey is a real investment.

00:13I've never done it. I wouldn't be able to stop myself from drinking my investment, but

00:16fair play to anyone who can do this. In this video, however, we're going to cover investing

00:21in stocks and shares, and we'll go through three points. What are shares and how you can generate

00:26money from them? How do you get started with investing? And we'll also talk about whether

00:30it's better to buy an index fund versus individual shares. If you're like me, you're probably

00:36wondering, with all the news about high inflation, high costs of living, how do I generate more

00:41income? How do I grow my wealth? Well, the good news is anyone can get started with investing

00:45and with small amounts of money too. Part one, what are shares and how can you generate money

00:51from them? When you think of buying shares, you should basically think of buying a tiny

00:56piece of a company that is listed on a stock market. So these might be companies like Apple,

01:01Vodafone or Coca-Cola. Let's take a made up example. If a company is worth one million pounds

01:07and there are one million shares in that company, then each share is worth one pound. If you buy

01:12one share for one pound, then you actually own a tiny piece of that company. Now, there are two ways

01:19to invest in shares to generate money. The first is from equity growth, which is when the price of the

01:25shares increases to a higher value than the price you originally paid for them. So let's take an

01:30example. If you invest in 100 shares at one pound per share and the price per share increases to one

01:36pound 20, then your total return would be £120 on your original investment of £100. The second way

01:44to generate money from shares is from dividends. Dividends are a percentage of company profits which

01:50are returned to shareholders, typically paid either quarterly or annually. On the FTSE 100,

01:55for example, there are stocks which pay 8, 9 or even 10%. So if you invested £1,000, you could see

02:02returns of up to £100 per year. Not life-changing sums of money, and you can see you need to invest

02:07quite large amounts to get sizable returns back. But if you go in with the mindset of growing this over

02:13the long term, it can be a great way to add another income stream. Part two, how can you get started

02:18with investing in shares? So getting started is actually relatively easy. The first step is to

02:24set up a brokerage account, and there are lots to choose from. Harbury's Lansdowne is the largest

02:28platform, and you can buy individual shares. You can also buy into index funds. It allows you to set up

02:34a stocks and shares ISA, or a self-invested pension, SIPs, or a general trading account, which would be

02:40subject to tax. Vanguard is another one of the well-established platforms. So it has a variety

02:46of investment options and covers all the major stock markets. There's also a number of market

02:51disruptors, such as FreeTrade, which is an app-only investment platform, and also Trading212, which you

02:58can actually use fake money. So if you want to trial first and then build up confidence to start

03:03investing your own money, this would be another option. So I have Hargreaves Lansdowne, as I find it

03:08gives me the most options for the investments I want to do. But there are lots of options out there,

03:13and it's worth comparing the pros and cons and then deciding on the best one for you. Once you've

03:18signed up to an investment platform, the next step is picking the shares and investments that you want

03:23to make. Part three, what's best, buying index funds or buying individual shares? To physically buy stocks

03:30and shares is very easy on the platform, just with a few clicks. But before you do anything, you need to

03:36do quite a bit of analysis to make sure you pick the right stock. So such as looking at the company

03:40financial statements or understanding the wider macroeconomic or political changes that could

03:46impact the company's performance. Warren Buffett, a famous American investor with a net worth of over

03:51$100 billion, says he picks stocks by looking at companies with a competitive advantage over the

03:57long term. He says to use this technique instead of trying to predict where the stock market is going

04:02to go next, as there are so many variables which can impact it going up or down in the short term.

04:08Now, you might be thinking, I don't know where to start with finding a company with a competitive

04:11advantage, or I don't know how to read company financial statements, or even just this all feels

04:17like a lot of work when I've already got a full-time job. There is another option, a slightly easier one,

04:22and that is to buy into an index fund, which is managed by a fund manager. Think of an index fund as

04:28a basket of companies, and it helps to manage the ups and downs in performance. So for example,

04:34if Tesla's share price has come down because perhaps Elon Musk has done another one of his

04:40tweets, then if you've got also in your basket Apple shares, which might be doing well and going up,

04:46then that can help balance out the performance of your fund at a particular point and over time.

04:52You can buy index funds via a brokerage account such as Hargreaves Lansdowne, and there are

04:57lots of different funds to choose from in the UK, US and Asia. For example, for the UK,

05:03there are funds which track the FTSE 100, which is the top 100 companies. And similarly for the US,

05:09there are funds which track the S&P 500, which is the top 500 companies. Quite a few investors will say

05:16if you don't want to do the analysis and pick individual stocks, then you can invest in something

05:22like the S&P 500. Historically, it's grown on average at around 10%, which is pretty good going

05:28when you compare it to just leaving your money in a bank account and earning only just a few percentage

05:33in interest. One thing I will say is there's a lot of content online about investing or how to become

05:39a millionaire, but you shouldn't go into investing with a get rich quick mindset as I think you're

05:44probably more likely to lose money than you are to make money. Warren Buffett famously said that his

05:49favourite holding period was forever. And to build true wealth, you need a long-term mindset with

05:55investing. I think if you go in with this mindset, then buying stocks and shares and index funds can

06:01be a great way of growing your wealth. I hope this video has been helpful. Feel free to add any

06:07questions in the comments and I'll see you on the next video. Take care and bye for now.

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