 Once again, ladies and gentlemen, boys and girls and children of all ages, you are now tuned in to the Prince of Investing coming to you guys and girls live all the way from the beautiful state of Denver, Colorado via the paradise of Honolulu, Hawaii. And thank you for everybody that's tuning in, catching us live and people that are catching the playback on the podcast and the YouTube channel. But don't forget that like, subscribe, comment, share button. And as always, I don't have a lot of time and I definitely know you guys and girls don't have a lot of time, so we're going to jump straight into it. I know I look a little fancy, right? I got the Honolulu background coming in behind me from Honolulu, Hawaii. So I want to say thank you to the think tech Hawaii team I did is doing great things and the stepping up for 2020. The first thing I want to tell you guys and girls is we're going to get straight into this topic. As you can see in the description box or how you may be catching this, this video is going to be about everybody notices tax season. This is tax season. People get their tax refunds. Some people are lucky enough to get a tax refund. So congratulations to you if you got a tax refund. And now you have been seeing the markets at an all time high. You're saying, Prince, how can I start investing? Where can I put this money? I want to be smarter about this. I've been watching your show. I've been watching the markets. How can I invest? What should I do? So in this episode, we're going to jump straight into what is exactly how to take your tax refund and how to invest it or how you should start investing. And the first thing I'm going to go through, I got to give you Dave Ramsey, seven baby steps and before you can start investing. First, you got to look at your personal finances. Where are you financially with your money? Right. For prime example, are you debt free? Do you have debt? Do you owe, you know, do you have, first question is, do you have debt? Do you have a savings account? Do you have an emergency fund? And if you do have an emergency fund, do you have a savings account? How much do you have into it? So first, let's walk down the first couple of things. First question is, do you have three to six months of emergency bills set aside in case of emergency? I.e., you lose your job. I.e., you know, you quit your job. Whatever may happen. You lose your source of income. You get injured, whatever the case may be. So the answer is no, you're not ready to invest. The second thing is, are you debt free? Now, majority of Americans, unfortunately, we are in debt because, you know, most of us can't pay off a house or pay off a car. I mean, just the average person probably can't. If you have, if you can't, great on you. But if you do have things like credit card debt, things like frivolous student loans, things like that or whatnot, I'm going to say take that and first look into those areas first. So I want you to be out of debt and I want you to have a emergency fund established. If you have debt, you don't have, I mean, if you have debt or if you don't have an emergency fund, we got to prioritize before you even get a chance to get to the world of investing. I'm going to tell you why. Because let's say if you start investing, you know, I've had friends that I've helped out with investing and I've seen it happen plenty of times in the past. They put their money into an investment. Investment starts to make money and guess what happens? You know, they lose their job. You know, they lose their job or something happens in the house where they have emergency funds, but guess what they want to do now? They want to go to those investments and they want to sell those investments in order to pay for whatever they need to pay for. So that's what I'm going to tell you. Have your emergency fund established first. Have an emergency fund before you even start investing. Because let's say if you invest your money, stop market crash, let's say if you invested $10,000, market goes down to $800, right? You invested $10,000, now you're $10,000 worth $8,000 because the market took a dip and you need new tires on your car or whatever the occasion be. And now guess what you're going to do? Now you are liquidating your funds, which means you're selling all your stuff, took a $2,000 loss on your investment just to be able to cover emergencies. So I'm going to first say, have your emergencies set aside first. The second thing I said I wanted you to have was, are you dead free? Why is this important, Prince? Because I have a credit card. My credit card charges me 15 to 16%. And I've received a $10,000, you know, tax refund and I owe $8,000 on my credit card. And I say, well, you know what? I got another pay off my credit card but I want to get into investing. What ends up happening is your credit card is returning 16%, right? It's earning 16% interest on top of interest and it's compounding. You put your money into investing and your investment starts to earn 10%. Now it doesn't take a mathematician to tell you that if you are earning 10% but you are losing 16% on your credit card, you are now in a negative 6%, which is bad juju. That's something that you don't want to happen, right? So the question is, how can you become better? How can you make your better decisions? So that's why I'm gonna tell you, hey, pay off that debt because most of times the debt is gonna grow at an interest rate higher than your investments. So imagine if you had no credit card debt and you earned 10% of your investments, now we're moving forward. So that's what I'm gonna say. If you have frivolous credit cards, I'm not saying you gotta have your house paid off and all your cars gotta be paid off. Those things are true. But if you got little frivolous little things you need to clear up or whatnot, I'm gonna say get those things, taking care of first and to get that emergency fund because if you lose your job, now you're trying to crawl your brokerage or you're logging into E-Trade or whatnot, pulling out on funds that's supposed to be for the long term. Because if you're looking at investing, especially into the stock market, you're looking at money you don't plan on touching for five years, money you can live without for five years, right? So I don't want you guys to make a classic mistake of starting investing and then having to pull that money out to go take care of emergencies. But if you already have a nice emergency saved up, right? Once you had that nice emergency saved up, now you can start investing. Another thing I wanna tell you guys and girls, if, let's say if you don't have an emergency fund, you're like, man, Prince, man, I gotta take all this money and put it into my emergency fund. I still wanna invest, you still can. Once you use that to establish your emergency fund, now every month when you get paid, you can instead of putting money in savings, you can now start investing, right? If you don't have any debt or things like that. So those are the big things I'm gonna ask you first. Now let's say if you're like, Prince, you know what? You know what? Let me first show you how to fix it if you're not there, right? How you wanna fix it if you're not there? I'm gonna go by Dave Ramsey's seven baby steps because I think they are truly amazing at all today, Ramsey. Number one, put $1,000 in your savings account. That's baby step number one, right? Once you have your, you put $1,000 in savings, you cut off all frivolous spending, meaning gym memberships, going to the movies, going to eating out, things like that. You cut back on all that stuff, close. You start to decipher what is the need, what is the want. If you don't need it, you cut it. All of your excess money, you're gonna go pay your debt. You're gonna line up your debt from lowest to highest. Not by the interest rate, but by the amount owed. So I owe $200 on this, $500 on this, $800 on this, $10,000 on this. You're gonna list them from high to low. Once you have listed them from high to low, every time you get paid, you're gonna attack the first one like a wildebeest. I mean, all your money's gonna go into paying off the lowest amount. So first you get the $200 paid off, now you allocate all your resources to pay off debt number two. Allocate and it's a snowball. And instead of paying debt one, all the money is going to another one and you're slowly chunking down your debt, right? Now, once you have $1,000 in your savings, you paid off your debt, now you're gonna go back and you're gonna build your emergency fund. Now when you got that emergency fund, now we're even entertaining the world of investment, right? So let's say if you're trying to get there. And let's say if you're already there. You're like, well, Prince, I got some work to do, but when I am there, I wanna get there. And to the other person that's saying, Prince, I'm already there, what can I do? So what I'm gonna tell you to do is the first thing I'm gonna look at is to say, how long, the first question you gotta ask yourself, what is your time horizon? How long are you looking to invest? Prince, I'm looking to invest for five years, 10 years, 20 years, 30 years, right? Once you got your time horizon, ask yourself, what risk level do you want? I'm gonna tell you right now, if you are 25, 35 years old and you're looking to invest for the next 10, 20, 30 years, then you need to realize that, I'm looking for the longer term, right? So now once you find that, you find out how much money. Let's say, if you know what, after I pay out my bills, I can afford $200 a month. You got $200 a month, you can invest $200 a month consistently for the next five or 10 years, right? And you know, I didn't do the math for you already, and I don't feel like doing the math in front of you, but that's 24, that's gonna be $2,400 a year, right? If you invest $200 a month, $2400 a year, if my math serves me correctly, and you can let that money compound for the next 10, 15 years. Now I'm gonna give you guys a secret number for the people out there who really listen to me, right? So the thing is, you have to sit down and figure out what is your number. Most people that start the world of investing, they don't even know where they're going. It's like taking off for a run and you don't know how far you're running. You're running 10 miles, five miles, one mile, or 20 miles, right? You gotta figure out how far are you willing to run? How far are you gonna run, right? So the question is, you gotta ask yourself, how far, what number does it take for me to retire? How much money do I wanna make in retirement? Let's take me for example, right? I've been in the military now, June will be 17 years. I retired from the military, I probably earned someone between $30,000 to $60,000 a year in retirement pensions. Let's say if I earned $50,000 in retirement pensions, right? And it's okay, well I have $50,000 in retirement pension. I want another $50,000 because I wanna retire at $100,000 a year for the rest of my life. So now I need to figure out how much money do I need to have set aside to be able to earn $50,000 a year for the rest of my life? Second thing I need to figure out is, how long do I plan on living? The average life expectancy in America is 78, right? But if you look at it, the average life expectancy in America is actually 78. But let's say if I plan on living to the age of 80. So now that I know I'm gonna live to the age of 80 and I wanna collect $50,000 a year until I'm 80 years old, what age do I plan on retiring? I might wanna retire at 40 years old. So I need to be able to figure out how much money, how much of an this egg I need to have in order to receive $50,000 for 40 years to the day I pass away. Now the next question is, what do I need to do to get there? So that number may be 1 million, 1.2 million, 1.3 million. Now from that, I'm asking you these questions because you can use a retirement calculator to figure out, hey, I need to have $1 million, $1.2 million and I have 10 to 15 to 20 years to get there. Once you figure that out, you can build a financial plan of telling you how much money you need to invest. Now people are saying, well, Prince, okay, well, okay. So where I put the money at, right? What do I need to do? So first thing you need to know, the benchmark of investing is the S&P 500 index. That's the standard in pools 500, right? And that is the top 500 companies in America. On average, before being adjusted for inflation, it returns 10% historically, right? Over the last 128 years. Let me give you a disclaimer. You know, past performance does not, it's not a great indicator of future performance. It's meaning, because it did that in the past, doesn't mean it's gonna do it in the future, but we have over 100 years of data to tell us that, hey, with all the market crashes, the ups, the downs, the sideways, the pluses, the boom, the market has returned 10% over the last 100-something years. So let's say we're in just for inflation, which is 3%. So how much money do I need to invest every year, earning 7% to reach my goal? That's what you need to figure out. I can help you figure that number. I did an episode on that called What Is Your Number? Well, I sit down and use a financial calculator, but the internet is filled with calculators. You can just type in retirement calculator and it'll tell you how much money you need to make. And I wanna tell everybody this, just listen. When you're young, take me, I'm 35 years old. Not the youngest, but I'm pretty young, right? So you take me, what I need to do is I need to figure out from the age of 35, let's say from the age of 18, 19, 20, when you enter into a workforce, to the age of 45 or 50 or whatever your work age is, this is your accumulation phase. This is when you're gonna accumulate as much money as possible, right? Then once you hit your retirement age of 45 or 50, whatever that age is, then that's gonna be your retirement age, right? So an accumulation age, let's say from 20 to 45, you wanna accumulate as much wealth as humanly possible, right? Then once you get to this age over here, 45, from 45 until death, this is when you wanna live off that next egg. So pretty much it's two phases. I wanna build to the next egg, and then once I get to this egg, I wanna live off the next egg. So take me for example, I like to calculate 7% interest every year while I'm in the accumulation phase. If you get 10%, 15%, 20%, 30% good on you, right? You're gonna get to your goal even faster. So if you reach your goal of earning 7% every year for 20 years, right, or 30 years or whatever the case may be, then I wanna pull my money out of the market returns and I wanna put it in something like long-term corporate burn funds or something like that, where I'm gonna earn something like 3% because once I retire, I don't want to risk the market over 2008 happening, or 2000 happening. I want my money to be returning back to me at a slower rate. So in my accumulation phase, I'm looking to gain 7% a year. I'm trying to get as much money as possible. You might be an author, you might be working your jobs, you might have a part-time job, whatever you do to earn money, earn as much money as you can, invest as much as you can, make that nest egg as big as possible. If you grow it to 10 million, 20 million, 30 million, great on you or whatever. Now when you get to that age of 45, now you're gonna put that into a conservative investment and then you're gonna be able to figure out, hey, I'm gonna be able to draw $60,000 for the rest of the year for the rest of my life. So point blank, once you know what your number is, I'm gonna give you the philosophy of it. Once you know what your number is, I'm gonna tell you this, I would take my money and if I was ready to invest, I wouldn't dump all of my money in at the market at the same time, but I will utilize a method called DCA. That's D as in Delta, C as in Charlie, A as in Alpha, that's called dollar cost averaging, meaning every single month to be the first of the month, 15th of the month or whatnot, I will allocate $200 to me personally, I like the NASDAQ for growth, right? S&P 500 is the one, it's the staple, but when you look up the S&P 500, compared to the NASDAQ out of the top three indexes, you had a Dow Jones NASDAQ S&P 500, the NASDAQ historically outperforms the S&P 500. Now, the NASDAQ does have higher highs, but it also have lower lows, right? The NASDAQ tracks the top 100, not the top, but a hundred, mostly technology-based companies, things like Microsoft, things like Amazon, think Facebook is in there, but it's mostly your technology companies. And the thing that I've seen with technology companies, if I had to bet on something for the future, technology companies experience more growth than your average S&P 500 index fund, right? So I don't care if I'm investing for the next five, 10, 20 years, I don't care if the market crashes in December. You know, I really don't because what I'm gonna do, I'm gonna invest straight through it, right? So some people be like, well, what if the market crash? You know, I don't wanna lose everything. I don't wanna blow up a lot, whatever the case may be. So if it's an index fund, somebody denies that, I'm gonna invest straight through it. I'm gonna be actually happy that things went on sale, right? It would be the same thing as you wanna ask yourself, well, where's everything going selling the store? Right? The people that become wiped out, portfolios that become wiped out, when our recession hits, are people who have used leverage, people who have borrowed money to invest, AKA using leverage, AKA using margin. You know, that's what happened in the rolling 20s. When I went back and I started a book called Security Analysis of Benjamin Graham, great book was the mentor of Warren Buffett, right? And in the rolling 20s, everybody used leverage to invest into stocks. It was all good as long as the stock market was going up. But the moment it came down, everything broke loose. So for a prime example, someone would have $6. They would give them $60,000 and they would let them invest this $60,000. It's easier to make a return on investment with the more money you have. So $60,000 of money was just rolling and rolling and rolling and rolling and rolling. And that's what they called the rolling 20s. Stock market couldn't lose. And 29 in the market crashed in that money that people, that they had leveraged and borrowed. Not only did they lose the value, but they also owed. So that was the downside of those people who get wiped out. The second thing is investing in the companies that are non profitable, that may not make it. For a prime example, you guys will probably know, I'm investing to Uber currently, right? So for the last two months, Uber has been good for me, right? But let's say we had a market crash on Monday. Uber is not profitable. Lyft is not profitable. Tesla is not a profitable company. When we have the next market crash, money becomes tight. Meaning it becomes hard to borrow, right? If creditors don't lend out money too much because they're afraid people can't pay them back. And there's a lot of companies growth that is built upon debt. Meaning they have borrowed a lot of money to experience growth. And the time the market goes down, that's when those particular companies will have an issue. So those are the people that are wiped out. Companies that are in the MAGA, that's what they're calling them now, right? I've been hoping I'm pronouncing that right, MAGA. That is Microsoft, Amazon, Google, and what is it, Alphabet? That said those correctly. Those are trillion dollar companies. Microsoft, Amazon, Alphabet, and there was Apple. Those are the four trillion dollar companies, market capitalization. Those are companies that look at those, those are growth companies and they're pretty much staples because they can withstand a downturn in the economy. So when you're looking at your companies paying attention to the debt to income ratio, those are companies that I've seen for a very hard time when the market collapses. When the market collapses, that new hot technology company that everybody liked, AKA your Tesla, your Uber, your Lyft, just to name a few, they would have a hard time if we took a downturn in the economy, right? So those are people that become wiped out but I'm not looking to invest in that way. I'm telling you, hey, if I was in your shoes, I was looking to start investing, I would go with the index fund, which is a basket of funds and I will consistently buy that on a daily, on a monthly basis, weekly basis, whatever you can afford. Now, once I became more of a seasoned investor, then I would turn around and tell people, hey, you know, okay, you know what? I've done my research, I've done my analysis. I wanna buy an individual stock of Microsoft. I wanna buy an individual stock into Google. I wanna buy an individual stock into Apple. Then it's nothing wrong with that, right? But it meanwhile, I will be an index person until I became smarter. So if you're out there, you're listening, you're ready to invest, you got some money, congratulations to you and thank you for thinking about your future of investing, I will first say, hey, look into index funds first. S&P 500 NASDAQ Dow Jones, right? Looking to those first, buy them on a dollar cost averaging basis, meaning regardless of the market's going up, down sideways, every month you pay it like a bill. You pay it like a bill consistently and then as you become more aware of investing, then you can elevate yourself to individual stocks. To the average person out there that goes out there and pick individual stocks, you're probably gonna pick some losers. People are getting paid millions of dollars to pick stocks and they can't beat the index. 92% of professional investors can't beat the index. So you as an average everyday person, why would you even try? Right? Especially starting out. Not starting out once you became more seasoned, once you became a little bit more educated, then maybe you can be some of the select few to actually beat the index. But that would be my way I would start investing. Congratulations on thinking about the world of investing. That would be my way. I hope that helped you guys and girls out with giving you information on starting to invest, right? And it's something I always, my buddy, he told me, he said, he said, Prince, you know, something that he said, you always said. He said, Prince, you always said, it's not about what you take in. It's about, it's not about what's coming in. It's always about what's going out. And I tell people that story, it's not about how much money you make. It's about how much money you spend, right? So always keep that positive cash flow mindset. Cash is flowing in, but how much cash is flowing out? Right? This is how we see stories of multi-million dollar athletes and you're like, wow, how did they go broke up? How did they experience these problems? Pretty simple. They spent more than they made, right? Well, Prince, if they only made this much money, how could they spend more? Call credit, leveraging, right? So it's not about what you take in, it's about what's going out. My name is Prince Dykes. This is the Prince of Investment live here on Think, Check, Away. Thank you for checking us out. Don't forget to hit that like, subscribe, turn on the share button. Until the next video, podcast, cartoon or whatever else you see us do crazy round the globe. Peace, be safe, I'm out and thank you.