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The Only Investing Video You’ll Ever Need (Start With $100)
Mark Tilbury
Overview
This video explores five different investment options for beginners starting with $100: individual stocks, REITs, cryptocurrency, gold, and index funds. The author compares these investments over four years based on learning curve, passive income potential, tax efficiency, risk level, and actual returns. While individual stocks and crypto offer high potential rewards, they also carry significant risk. REITs and gold provide a balance of income and stability, while index funds emerge as a consistently low-risk, high-return option for long-term growth. The video emphasizes the importance of starting early, diversification, and understanding the unique pros and cons of each investment.
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Chapters
- The video aims to identify the best investment for beginners starting with $100.
- Five investment types are evaluated over four years: individual stocks, REITs, cryptocurrency, gold, and index funds.
- Evaluation criteria include learning curve, passive income, tax efficiency, risk, and performance.
- The author is not a financial advisor and shares personal results; viewers should conduct their own research.
Understanding the evaluation framework and the author's disclaimer is crucial for interpreting the investment comparisons and making informed personal decisions.
The author invested $100 into each of the five categories four years prior to the video's recording.
- Individual stocks represent ownership in a company, offering potential for growth and dividends.
- The learning curve is high, requiring analysis of company financials and fundamentals.
- Passive income is possible through dividends, and capital gains occur if the stock price increases.
- Tax efficiency is good when using tax-advantaged accounts like ISAs or Roth IRAs.
- Risk is very high due to market volatility and the possibility of company failure; a randomly selected stock yielded a -32.34% return, while others like Apple or Nvidia could have yielded significantly more.
This section highlights the speculative nature of picking individual stocks, demonstrating that luck plays a significant role without proper strategy, and emphasizing the importance of diversification.
A $100 investment in Samsung stock, chosen randomly, resulted in $67.76 after four years, a 32.34% loss, while a hypothetical investment in Nvidia would have grown to $908.
- REITs (Real Estate Investment Trusts) allow investment in properties by pooling money from many investors.
- The learning curve is moderate, requiring understanding of how REITs operate and their property types.
- Passive income potential is great, as REITs are legally required to distribute at least 90% of profits as dividends.
- Tax efficiency is excellent when held within tax-advantaged accounts.
- Risk is medium, as REITs diversify across multiple properties but are still subject to real estate market downturns.
REITs offer a way to gain exposure to the real estate market and its income potential with lower barriers to entry and diversification compared to direct property ownership.
A $100 investment in a REIT resulted in $98.59 after four years, a 1.41% loss, but with $11.93 in dividends, leading to a net gain of 10.52%.
- Cryptocurrencies are digital assets not controlled by central authorities, running on blockchain technology.
- The learning curve is moderate, involving understanding wallets, exchanges, and tokenomics (supply/demand).
- Passive income can be earned through staking or yield farming, but these methods carry higher risks.
- Tax efficiency is poor, as crypto gains and rewards are often taxed, and they cannot be held in tax-advantaged accounts.
- Risk is very high due to extreme price volatility and the lack of regulation, making it prone to scams and losses.
This section highlights cryptocurrency as a high-risk, high-reward asset class suitable for speculative investment rather than a core component for beginners due to its volatility and tax implications.
A $100 investment in Bitcoin grew to $652.24 over four years, a 552.24% return, illustrating its potential but also its speculative nature.
- Gold is a traditional store of wealth, often considered a safe haven during economic uncertainty.
- The learning curve is low, with options like physical gold (coins/bars) or gold ETFs.
- Passive income potential is zero, as gold is not an income-generating asset.
- Tax efficiency is good, with some physical gold coins being tax-exempt and ETFs potentially held in ISAs.
- Risk is medium; gold protects wealth but has lower growth potential compared to stocks or crypto, with risks like theft for physical gold.
Gold serves as a hedge against inflation and economic downturns, offering stability and wealth preservation rather than aggressive growth.
A $100 investment in gold resulted in $140.10 after four years, a 40.1% return, demonstrating steady, conservative growth.
- Index funds offer diversified ownership across a broad market index (e.g., S&P 500) by holding a basket of stocks.
- The learning curve is low, as they are passive investments requiring minimal active management.
- Passive income potential is moderate, primarily through reinvested dividends from underlying companies.
- Tax efficiency is excellent when held in tax-advantaged accounts like ISAs or Roth IRAs.
- Risk is low due to broad diversification across hundreds or thousands of companies, historically providing consistent long-term returns.
Index funds are presented as an ideal, low-risk, and straightforward investment for most beginners seeking consistent long-term wealth growth.
A $100 investment in an S&P 500 index fund grew to $179.57 over four years, a 79.57% return.
- Each investment type has unique pros and cons, balancing growth potential with risk and stability.
- Index funds are recommended as a primary investment due to their simplicity, low risk, and consistent returns.
- Diversification across different asset classes is important for balancing risk and reward.
- Starting early is the most critical factor for wealth growth due to the power of compounding.
- Even small initial investments can grow significantly over time.
This concluding section synthesizes the findings, reinforcing the core principles of starting early, diversification, and choosing investments aligned with individual goals and risk tolerance.
The author allocates the majority of their personal portfolio to index funds while diversifying smaller percentages into other discussed investments.
Key takeaways
- For beginners, index funds offer a low-risk, high-return strategy due to their inherent diversification and historical performance.
- Starting to invest early, even with small amounts like $100, is more impactful than timing the market, thanks to compounding.
- Individual stock picking is highly speculative and requires significant research; random selection proved detrimental in the author's experiment.
- Cryptocurrency is a volatile, speculative asset class with high risk and poor tax efficiency, not suitable for all beginners.
- REITs and gold offer different risk-reward profiles, with REITs providing income from real estate and gold acting as a wealth preserver.
- Utilizing tax-advantaged accounts (like ISAs or Roth IRAs) significantly enhances long-term investment returns by reducing tax burdens.
- Diversification across multiple investment types is crucial for managing risk and achieving a balanced portfolio.
Key terms
Individual StocksREITs (Real Estate Investment Trusts)CryptocurrencyBlockchainGoldIndex FundsS&P 500DividendsCapital GainsTax-Advantaged Accounts (ISA, Roth IRA)CompoundingDiversificationLearning CurvePassive IncomeRisk LevelTokenomicsStakingYield FarmingSafe Haven Asset
Test your understanding
- How does diversification in index funds reduce risk compared to investing in individual stocks?
- Why is starting to invest early with small amounts considered more important than the amount invested?
- What are the primary risks associated with cryptocurrency investments, and how do they differ from REITs?
- Explain the concept of passive income potential and how it varies across individual stocks, REITs, and gold.
- How can tax-advantaged accounts like ISAs or Roth IRAs improve the overall return on investments like index funds or REITs?